A Tale of Two Runs: Depositor Responses to Bank Solvency Risk

Abstract

Using depositor-level data, we examine whether depositor actions reflect solvency risk for a bank that faced runs. We find that depositors with loans and bank staff are less likely than others to run in a low solvency-risk shock, but relatively more likely to in a high solvency-risk shock. Uninsured depositors always run more and this difference grows markedly in a high solvency-risk shock. In contrast, depositors with older accounts run less, and those with more frequent past transactions run more, irrespective of the underlying solvency risk. Our results show how depositor composition affects bank fragility and help characterize stable deposits.

Keywords: depositor runs, bank solvency risk, lending relationship