Bank Runs

This article looks at the key factors behind the failure of the Birkbeck Bank in 1911. Using a wide range of primary source material, it charts how the Bank emerged from its philanthropic roots as a mutual building society in the 1870s to go on and enjoy spectacular growth during the late nineteenth century before eventually faltering and failing in the early twentieth century. Throughout the analysis, particular attention is given to the investment decisions taken by the Bank’s management and the impact that these had on the Bank’s fortunes. In addition, the article also looks at the extent to which the Birkbeck Bank’s overall business model differed from those of other banks in this period. Ultimately, what it shows is that the Bank’s failure to modify its investment strategy quickly enough in response to changing market conditions — most notably the fall in the value of Consols and other gilt-edged securities — proved to be the decisive factor in its eventual collapse. For this reason, the article contends, it is appropriate to categorise the 1911 Birkbeck Bank failure as one caused by strategic inertia rather than excessive risk-taking.

Bilder über die eigene Zukunft können zerstörerisch sein. Entlang der Konzepte der selbsterfüllenden und der selbstzerstörenden Prophezeiung zeigt der Beitrag auf, wie
Organisationen aufgrund von Vorhersagen aus der Ordnung geraten und scheitern können. Zentrales Element in seiner Argumentation ist das aus der Religionssoziologie entlehnte Konzept der Realitätsverdopplung. Prophezeiungen stellen
dabei eine konkurrierende Realität zu der zunächst vorherrschenden Sicht auf eine Organisation dar. Welche zerstörerische Kraft in diesen Alternativordnungen von Wirklichkeiten liegen können, wird entlang zwei konkreter Fallstudien dargestellt: Die Fusion von DaimlerChrysler und der "bank run" auf Northern Rock.

The simple answer to both questions in the title of this paper: No. We concentrate on three key aspects of the banking system’s difficulties during the 2001–02 crisis. Two are related to bank behavior (increasing dollarization of the balance sheet and expanding exposure to the government), and the other is related to the degree by which banks were hurt by depositor preferences, specifically, the run on deposits during 2001. We find that there was substantial cross-bank variation, that is, not all banks behaved equally nor were hurt equally by the macroeconomic shocks they faced during the run-up to the crisis. Furthermore, using panel data estimation, we find that depositors were able to distinguish high-risk from low-risk banks, and that individual bank’s exposure to currency and government default risk depended on fundamentals and other bank-specific characteristics. Finally, our results have implications for the existence of market discipline in periods of stress, and for banking...

Ефективното функциониране на националната банкова система е от критична важност за здравето на цялата икономиката. Това до голяма степен е продиктувано от изпълняваната от нея функция по капиталова алокация, т.е. пренасочване на ликвидните спестявания на населението към инвестиционни проекти на индивиди и фирми. Процесът като цяло е свързан с трансформация на високоликвидни краткосрочни пасиви (потребителски спестявания под формата на влогове) в нисколиквидни дългосрочни активи (отпуснати кредити). Именно тази трансформация излага отделната банка, както и банковата система като цяло, на риск от ликвидни затруднения, които ако не бъдат овладени на време, могат да прераснат в банкови бягства, и дори – в банкови кризи.

In every country, policymakers erect a financial safety net to make systematic banking breakdowns less likely and to limit the disruption and fiscal costs generated when they occurs. This safety net includes implicit and explicit deposit insurance, lender-of-last-resort facilities at the central bank, procedures for investigating and resolving bank insolvencies, strategies for regulating and supervision banks and provisions for accessing emergency assistance from multinational institution etc. In this paper authors are trying to develop an empirical model that consider both liquid and illiquid assets of investment and set as optimal regarding the returns from both the institutions and investors point of view. They also focus on the aspect of institutional liquidity and the possible crises that might be the consequences and the model to overrun this likelihood to create the financial safety net.

Using aggregate and bank-level data for several countries, the paper studies what happens to the banking system following a banking crisis. Crises are not accompanied by a significant decline in aggregate bank deposits relative to GDP, although depositors leave weaker banks for stronger ones. Credit slows substantially, but the credit-to-GDP ratio is higher after the crisis. Output recovery begins in the second year after the crisis while credit still stagnates. Banks, including healthier ones, reallocate their asset portfolio away from loans, suggesting a lack of loan demand or collateral. Banks also improve their cost efficiency.

This article studies the main aspects of free banking to put forward the argument that such a system is endogenously stable and that financial crisis is an exogenous phenomenon. In support of this conclusion, it analyzes the cases of bank runs, concerted expansion and how free banking would affect business cycles according to different schools of thought. The article concludes that money can efficiently be a market phenomenon outside the state.

The coincidence of having both banking and currency crises associated with the Asian financial crisis has drawn renewed attention to causal and common factors linking the two phenomena. In this paper, we analyse the incidence and underlying causes of banking and currency crises in 90 industrial and developing countries over the 1975-97 period. We measure the individual and joint ("twin")

This paper provides an overview of the major issues with respect to financial system development in transition economies, which were discussed at a conference in Groningen, the Netherlands, December 1997. After a brief remark on the role of financial system design during economic transition, the paper focuses on the role of stock markets in the process of financial intermediation with