ECON102: Principles of Macroeconomics

Since banks are only required to keep a fraction of their deposits as reserves, there is the risk that all of their depositors will show up simultaneously to withdraw their deposits, such as during unfavorable market conditions. This is called a "run" on the bank. How can banks assure their customers that they can withstand these pressures and fulfill their obligations? Watch this lecture on the concerns and weaknesses of fractional reserve lending.