A situation in which a large number of depositors simultaneously withdraw their funds from a bank due to fears that the institution may become insolvent, creating a self-fulfilling crisis. Because banks operate on fractional reserves and lend out most deposits, they cannot satisfy all withdrawal requests at once, and a surge in redemptions can rapidly exhaust available liquidity. Bank runs have historically triggered broader financial panics, which is why modern banking systems use deposit insurance schemes and central bank lending facilities to prevent them.
Example
“Rumors about unrealized losses on the bank's bond portfolio triggered a bank run, with depositors withdrawing over $40 billion in a single week before regulators stepped in.”