Bank Runs With and Without Bank Failure / Sergio A. Correia, Stephan Luck, Emil Verner.

Format:

Book

Author/Creator:

Correia, Sergio A.

Contributor:

Luck, Stephan.

Verner, Emil.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w35504.

NBER working paper series no. w35504

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2026.

Summary:

We study the causes and consequences of bank runs. By applying large language models to historical newspapers, we create a comprehensive database of bank runs in U.S. history with information on 3,984 runs on individual banks from 1863 to 1934. Our novel data allow us to establish that runs are considerably more likely in weak banks but also occur in strong banks, especially in response to negative news about the real economy or the broader banking system. However, runs typically only result in failure for banks with poor fundamentals. Strong banks survive runs through various mechanisms, including signaling strength, interbank cooperation, and temporary suspension. At the local level, runs on banks with poor fundamentals translate into substantially larger declines in deposits, lending, and manufacturing activity than runs on strong banks. Our findings imply that poor fundamentals are central to explaining both when runs occur and when they have severe economic effects, tempering the view that small shocks can generate discontinuous jumps to bad equilibria through self-fulfilling run dynamics.

Notes:

July 2026.

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