What is one of the reasons banks are vulnerable to bank runs?

Since banks hold only a fraction of their deposits on hand as reserves, on any given day if enough customers make withdrawals, a bank could find itself unable to meet the demand for cash.

Banks pay low interest rates to depositors but make many conservative loans at high interest rates.

Customers have difficulty accessing their funds after hours because banks have short business hours

Banks were vulnerable to bank runs because they only held a fraction (usually around a tenth) of the money deposited there. The rest would be loaned out, which is how banks make money. Today, however, the Federal Deposit Insurance Corporation insures banks against bank runs, but for most of history indeed the first choice was an issue.

Parrain Parrain · Answer 2 · 2022-04-22T12:31:22+02:00

Banks are vulnerable to bank runs because they hold only a fraction of their deposits on hand as reserves, ...withdrawals, a bank ... unable to meet the demand for cash.

Why are banks vulnerable to bank runs?

Banks loan out the money that people give them but still keep a small percentage of it.

If too many people started to come to the bank to withdraw this money, the bank might be unable to meet the demand for cash because they wouldn't have the total amounts deposited.

In conclusion, option A is correct.

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