What if there were a run on a bank and no one knew? In recent days some
Commentators including Nouriel Roubini, Professor of Economics at
Fortis, focus of a cross-border rescue last week, was also in part the victim of a silent bank run, which along with a dramatic fall in its stock prompted Benelux governments to step in and inject cash into the banking and insurance group.
“If Fortis were in trouble, I would transfer my money over the internet to my parents’ account,” student Frederique Schilte said outside an
In the Great Depression between 1929 and 1933, much of the damage was caused by runs on banks that gained momentum as people saw lines of customers waiting to salvage cash. In Fortis’s case, much of the outflow came at the click of a mouse.
Fortis said it had lost about 3% of its deposits since the beginning of this year, both from consumer and business clients, or about 5 billion euros ($7 billion).
Dutch Finance Minister Wouter Bos noted Fortis had trouble keeping corporate clients and was faced with “increasing liquidity problems in the banking activities.”
“Big amounts were withdrawn by private and business clients, particularly in
The intervention seemed this week to have worked.
“We were worried last week, but now that it is now part of the Dutch government, we are staying with Fortis,” said a Dutch customer who declined to give her name but said she and her husband have been Fortis customers for 28 years.
Speed and Volume
Britain’s Northern Rock, which last September suffered the first run on the deposits of a major British bank for more than 140 years, saw customers line up over three days at branches when confidence evaporated, creating scenes that one politician said made Britain looked like “a banana republic.”
But branch withdrawals slowed after the government guaranteed savings. The major damage was done by withdrawals by internet, postal and telephone customers. Almost 14 billion pounds ($25 billion) of savings were withdrawn from Northern Rock from the start of the panic until the end of 2007, more than half its retail deposits.
About one-third of the cash pulled out was at branches, but the remaining two-thirds, or almost 10 billion pounds, was taken out by non-branch customers.
Whether visible or not, the psychology is the same: Barbara Williams, a retired customer of Northern Rock, was one of hundreds who stood in line outside its branches last year.
“I didn’t initially panic but the more you watch the news and read you think maybe we ought to do it as well,” she told Reuters at the time. “We thought we would do what everyone else is doing. Rightly or wrongly it’s a chance you can’t take.”