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Mass panics can arise in response to a variety of situations, such as the spread of pathogens, bank failures, or insecurities about economic supplies. Such panics can produce contagious behaviors such as fleeing social contacts, bank withdrawals, and panic buying. In such situations, the processing of external stimuli, mediated by the perceptions and biases of the individual, can reach a threshold point at which panic behaviors are triggered. Due to the human propensity to imitate the behavior of others in uncertain crisis situations, one individual's panic behavior can spread contagiously. This paper looks at the similarities among case studies of mass panic around the world and from these cases synthesizes a conceptual model to aid our understanding. Decision-makers can use this model to strengthen national resilience against panic-generated behaviors and ensure an orderly and successful public response to future biological, financial, or economic crises. [ABSTRACT FROM AUTHOR]

Financial disasters can have catastrophic consequences for economies that extend beyond the organisational walls. This case study will examine the downfall of Silicon Valley Bank by exploring ineffective risk management practices and the absence of the Chief Risk Officer (CRO). It will begin by establishing a basic understanding of the bank's history and client base before diving into the events that led up to the third-largest bank run in US history. In our upcoming discussion, we will delve into the risk management standards that financial organisations typically employ to avoid insolvency. Additionally, we will emphasise the pivotal importance of the CRO role within such institutions. Finally, the study will conclude by emphasising the critical role of robust risk management practices, effective regulatory oversight and organisational reforms in mitigating the risks associated with financial disasters and safeguarding the resilience of the banking ecosystem. Understanding the impacts and lessons of past financial disasters is essential to build a more stable and resilient economic landscape as the financial system evolves. [ABSTRACT FROM AUTHOR]

In this study, we analyze the effect of a merger between banks by extending a structural model of the banking industry with the possibility of bank runs developed by Egan et al. (2017; American Economic Review, 107, 169–216). We use our framework to analyze whether the 2008 merger between Wells Fargo and Wachovia was beneficial for social welfare. The results suggest that the stability of the financial system is critical for evaluating mergers in the banking industry. [ABSTRACT FROM AUTHOR]

In the financial crisis of 2023, information traveled with unprecedented speed and ease between organizations' frontstage and backstage. Barely had Silicon Valley Bank (SVB) failed on the morning of March 10 when journalists disclosed information about the decisions leading to its bankruptcy. After finding itself initially outmaneuvered, the Federal Reserve adopted a new strategy: on April 28, it released a report detailing the decisions of SVB's managers and its regulators over the preceding four years. The 118-page narrative was accompanied by 379 pages of documents, including confidential supervisory information of the type that the Fed usually guards closely. This article reads the Fed's report through the historiographic framework developed by Hayden White, analyzing the authors' use of data, concepts, and emplotment. It argues that, while the report had significant weaknesses if measured by the standards of financial history, it succeeded as an intervention in public discourse. In the longer term, however, the Fed's new narrative strategy may increase the pressure on financial regulators. The authorized publication of confidential supervisory information lowered the threshold for potential leakers, and the Fed's opening of its backstage contributed to public perceptions that any secrecy among financial elites is suspect. [ABSTRACT FROM AUTHOR]

The theoretical literature on bank runs has modeled depositors' withdrawal decision as a one-off choice, made simultaneously by all depositors. Our game-theoretic framework gives depositors a heterogeneous, stochastic opportunity to change their minds about withdrawing their money. They can run out of (or run into) the crowd in front of the bank based on their observation of what others have done. Depositors' opportunity to change their decision supports implicit coordination, which in some circumstances reduces the probability that self-fulfilling bank runs will occur. [ABSTRACT FROM AUTHOR]

In this study, we explain the driving forces behind the secular stagnation associated with a persistent decrease in interest rates by employing a model that incorporates a crisis risk triggered by government debt accumulation. The model shows that fear of large‐scale capital taxation and capital misallocation in future debt crises accounts for almost half the economic slowdown in Japan over the past two decades. Over the same period, the government bond yield declines, because a decrease in the expected returns on capital makes investing in government bonds more attractive than investing in capital. [ABSTRACT FROM AUTHOR]

• Algorithmic stablecoins are inherently fragile, as they are backed by bubble-like, self-issued tokens in a self-referencing manner, and often propped up by distortionary reward yields. • We use transaction-level blockchain data to examine the downfall of the Iron Finance algorithmic stablecoin (similar to Terra–Luna) in detail. • Retail users reacted more slowly to the 'bank run' at Iron Finance. This study examines the downfall of Iron Finance's algorithmic stablecoin in June 2021 and draws parallels with the Terra–Luna (UST) collapse in May 2022. Using transaction-level blockchain data, we dissect the events leading to Iron Finance's failure, unveiling algorithmic stablecoins' inherent vulnerabilities. We highlight the disproportionate impact on retail investors, a pattern also mirrored in UST, where confidence erosion led to a similar destabilizing 'bank run.' Our analysis contributes to the broader understanding of the fragility of DeFi ecosystems and sheds light on the risks of adopting permissionless blockchains and algorithmic stablecoins as payment infrastructures and forms of digital money. [ABSTRACT FROM AUTHOR]

This paper studies sectoral balance sheet dynamics when a central bank digital currency (CBDC) is first introduced into an economy, and when there is an attempt at a large-scale run out of bank deposits into CBDC. We find that if the introduction of CBDC follows a set of conservative core principles, bank funding is not necessarily reduced, credit and liquidity provision to the private sector need not contract, and the risk of a system-wide run from bank deposits to CBDC is addressed. In addition, under these core principles CBDC can be expected to trade at par with other types of money in all but the most extreme situations. The core principles are: (i) CBDC pays an adjustable interest rate; (ii) CBDC and reserves are distinct, and not guaranteed to be directly convertible into each other at the central bank; (iii) no guaranteed convertibility of bank deposits into CBDC at commercial banks (and therefore by implication at the central bank); (iv) the central bank guarantees to issue CBDC only against eligible securities. The final two principles imply that households and firms can freely trade bank deposits against CBDC in a private market, and that the private market can freely obtain additional CBDC from the central bank against eligible securities. [ABSTRACT FROM AUTHOR]

This paper examines the career of economist Prof. George Kaufman, whose work combined and benefited both academia and the financial industry, helping both better understand the problems of financial stability, financial regulation, and financial sector competition. In doing so, he brought together great minds from both fields and helped many economists progress in their careers. Prof. Kaufman promulgated the idea that government policy needed to foster two simple goals: proper incentives and competitive markets. He believed the combination would produce a richer society and more stable economy. He created the U.S. Federal Reserve's Conference on Bank Structure and Competition, the leading conference in the world addressing financial regulatory issues for 50 years. Prof. Kaufman also founded the U.S. Shadow Financial Regulatory Committee in 1986 in the midst of the thrift crisis, helping to solve that crisis and inspiring the creation of other shadow financial regulatory committees around the world. Through his activities, he left behind an outstanding legacy of leadership, research, and opinion in various economic fields, providing platforms upon which many scholars will build in the coming decades. [ABSTRACT FROM AUTHOR]

This paper simulates bank runs by using an agent-based approach to assess the depositors' behavior under various scenarios in a Diamond-Dybvig model framework to answer the following question: What happens if several depositors and banks play in multiple rounds of a Diamond-Dybvig economy? The main contribution to the literature is that we consider a sequential service restriction and the influence of the neighborhood in the decision of patient depositors to withdraw earlier or later. Our simulations show that the number of bank failures goes to zero if the amount that banks pay to those who need liquidity is under a certain value. If this amount is above this value, the bank runs continue to occur after a long period and the market concentration is higher than in the former scenario. When wealth accumulation is allowed in the benchmark formulation, bank runs reduce and market concentration increases. [ABSTRACT FROM AUTHOR]

In the banking system, withdrawal deposit and decrease resources can cause shock in liquidity. On the other side, Bank-centered financial system in IRAN will affect on household consumption decisions and production and investment decisions of manufacturing companies. In this study, in order to survey the effectiveness of resources shock caused by Bank Runs on consumption and investment, New- Keynesian dynamic stochastic general equilibrium (DSGE) model with regard to the banking sector and relevant features is presented. Through this model the response of the variables mentioned against this shock is evaluated. The results of the simulation and estimation models with data that are made stationary in the period 1981 to 2018 with appropriateness of the proposed model for Iran's economy show that the theoretic model is compatible with the economic realities and banking resources shock will leads to consumption increase and investment decrease.

This paper assesses the interaction between the housing and credit markets and shadow banks, with the possibility of bank runs. The findings illustrate how a negative TFP shock is amplified by macro-financial and macro-housing channels through household balance sheets, bank balance sheets, and liquidity channels. If the shock renders the shadow banking system insolvent, two equilibria coexist: the no-run equilibrium and the run equilibrium. In this instance, run is a sunspot coordination failure; if households receive a negative signal from fundamentals and stop rolling over deposits to the financial sector, banks are not able to fund their losses with new deposits. So they are forced to liquidate their assets at an endogenous fire sale price. The main finding of this paper is that the model with housing provides a comprehensive account of the consequences of economic crises, namely the house price double-dip, the output downward spiral, and the lengthy recovery period. To eliminate the bank-run equilibrium, this paper proposes macroprudential policy tools in the form of capital adequacy buffers and loan-to-value ratios. Then a welfare analysis is applied to determine the optimal policy mix. [ABSTRACT FROM AUTHOR]

This paper develops a basic framework characterized by a monetary union in which a shock to the policy interest rate, i.e. the determinant of a recessionary stance in the monetary policy, can imply that a member state finds it worthwhile to leave this union and/or that the corresponding banks declare bankruptcy. Our aim is to analyze the various possible reactions that bank depositors may have when this shock is transmitted to the interest rates on their bank deposits. We compare these reactions in two different policy frameworks characterized either by the presence or by the absence of a Centralized Deposit Insurance Scheme (CDIS). Our model shows that the introduction of a CDIS is per se not sufficient for zeroing the probability of bank runs. [ABSTRACT FROM AUTHOR]

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In this paper we attempt to characterize the stability of shadow deposits in China with interest rate liberalization and fintech developments. We emphasize that shadow banks provide higher but riskier returns and such characteristics affect the stability of shadow deposits. In our setting, the stability of shadow deposits is influenced by two offsetting effects, namely: the patience effect, which makes investors more willing to wait because of the potentially higher returns; and the uncertainty effect, which makes investors more likely to withdraw as a result of higher risk. Under liberalized interest rates, the patience effect will erode and the uncertainty effect will be heightened because the post‐liberalization higher return of traditional banks undermines the importance of the extra return of shadow deposits to depositors, while preserving the importance of the risk aspect. Fintech development is modeled as a reduction in the withdrawal cost that facilitates runs. This affects the stability of shadow deposits because of their wider fintech reliance. Regulators should be cautious in pushing interest rate liberalization and fintech application alongside building a safety net for shadow banking. [ABSTRACT FROM AUTHOR]

Using an event study approach, we examine how the forex, metal, energy, and cryptocurrency markets responded to the SVB collapse. We observe that the forex and metal markets respond positively on event and post-event days. In contrast, the cryptocurrency market reacts negatively but generates positive abnormal returns, indicating that investors may seek refuge in these purported safe-havens. However, the energy market responded adversely to the event, and the trend continued in the aftermath. The study advocates the need for monitoring and minimizing financial contagion risk due to the increased interconnectedness of the financial markets. Our findings highlight the perilous consequences of the SVB collapse, as it triggered contagious effects that may spread throughout the global financial markets. Therefore, investors and financial institutions must diversify their portfolios across various asset classes, which can help mitigate the risks of such events. [Display omitted] • FX, metals energy, crypto moves due to Silicon Valley Bank (SVB) collapse differ. • Event study approach shows FX & metals respond positively on event and later days. • Cryptos initially react negatively but generate positive abnormal returns later. • Thus, investors have looked for the refuge in these purported crypto safe havens. • Contagion risk should be duly monitored due to increasing integration of markets. [ABSTRACT FROM AUTHOR]

In this paper, we aim to find out whether it is possible to prevent the bank runs in times of a crisis, if the media, being under government control, do not inform people about the unstable economic situation. Such a measure being tempo-rary and used only in times of crisis, can prevent a sharp decline in retail deposits, which in turn could cause the collapse of the banking system and worsen the consequences of the crisis. We use the data from 79 regions of Russia for 2001–2010. The results show that during the 2008–2009 crisis in the regions where the freedom of the media is controlled to a greater extent, the reduction in retail deposit growth was much less severe. Our next hypothesis was that this effect can vary depending on the depositor ability to interpret the facts reported in the press, as well as the bank risks in the region. Our results indicate that the most dramatic reduction in the growth rate of retail deposits during the crisis was observed in regions where investors demonstrate high levels of financial literacy, banks show high levels of credit risk, and media freedom is limited to the least extent.

Since the insolvency of Lehman Brothers brought the global financial system to the brink of collapse in 2008, there is again a strong interest in properly understanding liquidity risks and the triggers of liquidity crises. Econophysicists recently developed an alarm index for institutional bank runs (IBRs) based on the log‐periodic power law. The key innovation of this alarm index is that it shall measure the speculative interactions among professional creditors that can culminate in IBRs. The paper at hand extends this line of research, in particular, by applying new critical parameter ranges that were recently derived directly from credit default swap (CDS) spreads of defaulted banks. The better performance of the revised alarm index in comparison with the originally proposed alarm index underpins the hypothesis that the CDS market belongs to a different universality class than, for example, the stock market. Furthermore, the refined index outperforms a modification of the bank run probability index that was previously proposed in the financial literature. This result further confirms the hypothesis that—under certain circumstances—financial markets are driven by investors whose investment decisions critically depend on the actions of other investors. Highlights: We refine a recently proposed alarm index for institutional bank runs.Applying credit default swap (CDS) spread‐specific parameter ranges leads to an earlier crisis detection.In addition, the late‐2000 financial crisis can be predicted with higher confidence.The refined alarm index also outperforms its benchmark from the finance literature.In summary, our results imply that CDS spreads belong to a new universality class. [ABSTRACT FROM AUTHOR]

We analyze the pre‐deposit game in a two‐depositor banking model. The Glass–Steagall bank is assumed to be restricted to holding only liquid assets. Depositors tolerate a panic‐based run if its probability of occurrence s is small. How s affects the allocation of assets depends on the incentive compatibility constraint (ICC). When the ICC is not binding, the sunspot allocation is not a mere randomization over the run and non‐run outcomes under the so‐called "optimal contract." We offer this paper as a contribution to both the literature on banking and financial fragility and also the broader literature on sunspot equilibrium. [ABSTRACT FROM AUTHOR]

This study examines the impact of the SVB collapse on the global equity markets. Using an event study methodology, our findings indicate that equity markets, in general, responded negatively to the SVB collapse. Our in-depth regional analysis shows that capital markets in Europe, Latin America, and the Middle East and Africa experienced a significant negative response on the day of the event, and this effect continued in the aftermath of the collapse of SVB. We also document a delayed response in the Asian market, supported by the significant abnormal returns observed in the post-event days. Our findings highlight the need for both firms and investors to monitor systemic risk due to the increased connectedness of financial markets. Even though investors usually diversify their portfolios, we suggest that in the case of a major negative event, such as the SVB collapse, the expected diversification benefits may not be fully realized. [Display omitted] • This study examines the impact of Silicon Valley Bank collapse on financial markets. • Negative abnormal returns documented on event day and post-event days. • SVB collapse affected European, Latin American, and Middle East /Africa markets. • Asian markets had delayed response with significant post-event abnormal returns. • Policymakers must monitor and minimize financial risks to ensure stability. [ABSTRACT FROM AUTHOR]

• Impact of Silicon Valley bank failure on 11 major global assets is assessed. • With the exception of gold and US treasury Bills, no significant response from other asset classes on the event day. • Gold acted as a safe haven. • Findings are consistent even with dynamic connectedness approach (TVP - VAR). • Overall, little evidence of reputation contagion or spillover. We explore the impact of Silicon Valley Bank failure on 11 major global assets using event study approach. The findings reveal that except for Gold and US Treasury Bills, there is no significant response from other asset classes on the event day. Gold is perceived as a safe haven by investors on the event day. The investors shredded investments in US Treasury Bills on event day and post event, an outcome of uncertainty shrouding monetary policy stance of Federal Reserve in the aftermath of Silicon Valley Bank failure. We also estimated Net Total Directional Connectedness based on a TVP-VAR model for the sampled assets. The results remained robust to this approach. Overall, we find little evidence of reputation contagion or spillover from the failure of SVB to other asset classes. In respect of implications, it can be inferred that the diversified portfolios, precious metals, USD, cryptocurrencies, ESG and Clean Energy assets may be employed to diversify the portfolios during crisis periods. In addition, US monetary authorities should endeavor to reduce market uncertainty. Finally, Crude Oil appears to be vulnerable to adverse market conditions and may be included in the portfolios with caution during looming crises periods. [ABSTRACT FROM AUTHOR]

Alongside with the economical globalization, the difficulties of economic nature became so varied due to the growth of relations. The article proposes to analyse the behavior of the Romanian Central Bank based on annual reports as a result of changes emitted by the National Bank of Romania. First of all, it is highlighted the benefit brought by this guideline for credit institutions as well as for clients, regardless of their field of activity. Therefore, this article tries to offer a valid answer to the question whether the improvement of product and services offered by RCB (Romanian Commercial Bank), in conformity with the cautious changes lead, on one side, to financial stability but on the other side to the attraction of an impressive number of clients.

• Impact of Silicon Valley Bank collapse on global financial markets. • Impact significantly negative for US and GCC equities, global banks, bitcoin. • Abnormal returns insignificant for most fiat currencies, metals, and energy markets. • SVB event had a major but constrained effect on the global financial system. • Affecting a small number of markets while largely ignoring others. We investigate the impact of the collapse of Silicon Valley Bank on global financial markets, identifying significant but narrow impacts. Abnormal returns are significant and negative for US equities, global banks, Bitcoin, as well as GCC equities. However, abnormal returns are insignificant for most fiat currencies, metals, and energy markets. That the SVB collapse had minimal effects on these markets suggests that the SVB event had a major but constrained effect on the global financial system, affecting significantly a small number of markets while largely ignoring others. Results highlight possible contagion points with regard to reactions to banking stress. [ABSTRACT FROM AUTHOR]