KC Fed, Report: Understanding the Speed and Size of Bank Runs in Historical Comparison

“Policymakers have examined recent bank failures closely and are taking seriously the question of why deposit runs were so fast and large by historical standards. They have pointed to technology, social media, and the nature of the depositor base at each bank as factors that increased the speed of runs. From an historical perspective, the most unusual characteristic of the bank runs in 2022-2023 is the depositor base at failed institutions. While advances in technology likely also contributed to increased speeds, the run on Continental Illinois in 1984 was already a highly electronic one. This analysis is likely most applicable to the supervision of very large banks with significant and concentrated corporate deposits. At such banks, if con­nections and similarities among depositors are especially important in driving the speed of runs, then so is supervi­sion and regulation that gathers information about the likelihood of depositors behaving in similar ways during a crisis. Such information could help tailor stress testing assumptions or price deposit insurance risk. On the other hand, if changes in technology are more important, then deposit outflow assumptions may need to be raised for all types of uninsured depositors across the board.”