Strong Banks Survive Runs, New York Fed Study Finds

Bank runs have long been cast as the moment depositor panic turns a manageable shock into insolvency and a broader financial crisis. A competing view holds that withdrawals mostly expose damage already embedded in a bank’s balance sheet. The distinction matters for regulators: if panic is the main threat, emergency liquidity can break the cycle; if weak capital, poor profitability and costly funding are decisive, solvency measures must take priority.

A July 2026 Federal Reserve Bank of New York staff report by Sergio Correia, Stephan Luck and Emil Verner examined 3,984 runs on individual U.S. banks from 1863 through 1934. Findings highlighted on July 7 showed that a bank facing a run had a 38% probability of failure, rising to 63% for institutions in the weakest fundamentals decile, while the strongest banks essentially never failed. Runs ending in failure also predicted a drop of more than 5% in local manufacturing activity within 18 months.