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Keep Calm and Bank On: Panic-Driven Bank Runs and the Role of Public Communication

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Listed:
  • Sandri, Damiano
  • Grigoli, Francesco
  • Gorodnichenko, Yuriy
  • Coibion, Olivier

Abstract

Using a survey with information treatments conducted in the aftermath of SVB’s collapse, we study households’ perspectives on bank stability, the potential for panic-driven bank runs, and the role of public communication. When informed about SVB’s collapse, households become more likely to withdraw deposits, due to both a higher perceived risk of bank failure and higher expected losses on deposits in case of bank failure. Leveraging hypothetical questions and the exogenous variation in beliefs generated by the information treatments, we show that households reallocate deposit withdrawals primarily into other banks and cash, with little passthrough into spending. Information about FDIC insurance and communication about bank stability by the Federal Reserve can reassure depositors, while communication from political leaders only influences their electoral base.

Suggested Citation

  • Sandri, Damiano & Grigoli, Francesco & Gorodnichenko, Yuriy & Coibion, Olivier, 2023. "Keep Calm and Bank On: Panic-Driven Bank Runs and the Role of Public Communication," CEPR Discussion Papers 18448, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18448
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    Cited by:

    1. is not listed on IDEAS
    2. Jaremski, Matthew & Richardson, Gary & Vossmeyer, Angela, 2025. "Signals and stigmas from banking interventions: Lessons from the Bank Holiday of 1933," Journal of Financial Economics, Elsevier, vol. 163(C).
    3. António Cardoso & Marta Cardoso, 2024. "Bank Reputation and Trust: Impact on Client Satisfaction and Loyalty for Portuguese Clients," JRFM, MDPI, vol. 17(7), pages 1-23, July.
    4. Grigoli, Francesco & Sandri, Damiano, 2024. "Public debt and household inflation expectations," Journal of International Economics, Elsevier, vol. 152(C).

    More about this item

    Keywords

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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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