Europe Bank Runs: A History of Crisis

Europe has experienced its fair share of bank runs, with some of the most notable ones happening in the past century.

The first major bank run in Europe occurred in 1931, when the Creditanstalt bank in Austria collapsed, triggering a chain reaction of bank failures across the continent.

The 1931 collapse of Creditanstalt was a pivotal moment in European banking history, leading to a global economic downturn known as the Great Depression.

In the years following World War II, European countries experienced a period of economic growth and stability, but this was short-lived, as the 1970s saw a series of bank runs and financial crises hit the continent.

The 1970s bank runs were often linked to economic instability and high inflation, which eroded trust in the banking system and led to widespread withdrawals.

In the 2020s, Europe witnessed significant bank runs, particularly in response to international conflicts and economic instability.

The Russian invasion of Ukraine in 2022 led to a bank run at Sberbank's branch in the Czech Republic, where depositors withdrew their funds over fears of instability and to show support for Ukraine.

The Czech National Bank subsequently removed Sberbank's license to operate, effectively shutting it down, but depositors were guaranteed refunds up to €100,000 per account through the Czech Financial Market Guarantee System.

A banking panic occurred across multiple Russian banks in February 2022, following sanctions against Russia and the removal of Russian banks from the SWIFT system.

The biggest bank run in history occurred in March 2023, when a US$42 billion bank run on Silicon Valley Bank led to its closure by California and United States regulators, with FDIC-insured deposits assumed by the Deposit Insurance National Bank of Santa Clara.

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The EU Crisis has been a major concern for the past few years. The European sovereign-debt crisis, which began in Greece in 2009, has led to widespread economic instability across the continent.

The crisis has resulted in high levels of unemployment, particularly among young people. In some countries, such as Spain and Greece, unemployment rates have exceeded 25%.

The European Central Bank (ECB) has taken steps to address the crisis, including implementing quantitative easing and providing emergency loans to struggling countries. The ECB's actions have helped to stabilize financial markets, but the underlying economic issues remain unresolved.

The crisis has also led to a rise in nationalist and populist sentiment across Europe, with some countries seeking to leave the EU altogether. The UK's decision to leave the EU in 2016 is a notable example of this trend.

The EU's response to the crisis has been criticized for being slow and ineffective. The EU's leaders have struggled to agree on a unified approach to addressing the crisis, leading to a sense of disunity and disarray within the bloc.

In the 2020s, we've seen some significant banking events that are worth noting. A bank run occurred at Sberbank's Czech Republic branch in February 2022 after the Russian invasion of Ukraine, causing the Czech National Bank to shut it down.

The Czech Financial Market Guarantee System's deposit insurance fund guaranteed refunds on deposits up to €100,000 per account, backed by the full faith and credit of the Czech government.

In the same year, sanctions against Russia led to a banking panic across multiple Russian banks on February 27, 2022. This caused widespread concern and instability in the financial sector.

The biggest bank run in history occurred at Silicon Valley Bank in March 2023, with a US$42 billion withdrawal leading to the bank's closure by regulators.

A bank run can happen very suddenly, as Alistair Darling said on Sky News, and can blow up within hours. Just look at the chart from the National Audit Office, which shows how fast cash escaped from Northern Rock during its run.

In one day alone, Northern Rock had more than £1.5bn of deposits leave its vaults, around 5% of its deposits. The Greek banking system reportedly had €700bn (0.4% of total deposits) escape on one day earlier this week, but this is unlikely to happen in Greece's case since most deposits are from normal citizens who are less likely to move their cash out of the country.

However, a genuine domestic bank run is still a possibility, where citizens withdraw cash from banks and stash it at home, as there are already anecdotal reports of families withdrawing more cash than normal.

The Credit-Anstalt Bank Failure of 1931 was a major event in the history of bank runs. It was one of the largest bank failures in history, with the bank's collapse leading to a loss of over $300 million.

The bank's failure was a result of a combination of factors, including a series of bad investments and a lack of regulation. This lack of regulation allowed the bank to engage in risky lending practices that ultimately led to its downfall.

The bank's collapse had a ripple effect on the global economy, contributing to the Great Depression. The failure of Credit-Anstalt was a major contributor to the loss of confidence in the banking system, leading to a wave of bank runs across Europe.

In the aftermath of the bank's failure, the Austrian government was forced to take drastic measures to prevent further economic collapse. This included the establishment of a new central bank and the implementation of strict banking regulations.

The Credit-Anstalt bank failure was a major wake-up call for the international community, highlighting the need for stronger banking regulations and greater oversight.

A bank run is a situation where people withdraw their money from banks in a short period of time, often due to a loss of confidence in the bank's stability.

This can happen very suddenly, as Alistair Darling pointed out, and can blow up within hours.

In fact, during the Northern Rock run in 2007, more than £1.5bn of deposits left the bank in just one day, which is around 5% of its deposits.

The scale of this kind of deposit flight is a major concern, especially in countries like Greece where there are already reports of families withdrawing more cash from their bank accounts than normal.

If this became a flood, then the situation would be extremely worrying for the economy.

In Greece, the proportion of deposits that are mobile and can be shifted from one country to another is likely to be relatively limited, as most deposits are made by normal citizens from their salaries.

However, there is still a risk of a genuine domestic bank run, where people withdraw their cash from banks and stash it at home.

The first major European bank run occurred in 1793 during the French Revolution, when the Assignat, a paper currency issued by the French government, lost value and sparked a bank run in Paris.

This period of instability continued through the early 19th century, with bank runs happening in various European countries, including Britain and Germany.

The late 19th and early 20th centuries saw the rise of central banking and the establishment of the Bank of England as a lender of last resort, helping to mitigate the frequency and severity of bank runs.

If this caught your attention, see: Bank Run on Deposits

The 19th century was a time of economic turmoil, with bank runs and financial crises causing widespread panic.

One notable example is the bank run that occurred in 1866, when Overend, Gurney and Company suffered significant losses due to poor railway stock prices.

In 1865, the company had incorporated as a limited liability company, but this didn't prevent its financial woes. Payments were suspended on May 10, 1866, leading to a major panic.

Many townspeople were left disappointed and unable to access their money from the banks. This was a common experience during the Panic of 1893, when numerous bank runs took place.

Here are some key events that highlight the financial struggles of the 19th century:

The 1930s were a tumultuous time in history. Many bank runs occurred during the Great Depression, causing widespread panic and economic instability.

In the 1930s, the Great Depression had a profound impact on the world. It lasted for over a decade, causing widespread poverty and unemployment.

The 1930s were a time of great social change.

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