Bankrun

Since world leaders decided during the Bretton Woods convention that money doesn’t need one to one collateral, the monetary system drastically changed. Money these days is created out of debt. Banks can therefore give more loans than they have in deposits and equity. Governments require banks to keep a certain percentage of liquidity on their balance in order to secure repayment of outstanding savings. When all customers decide to take their money away from their bank accounts, a problem occurs. This process, where people are afraid and take their money away from their account is called a bankrun.

Many countries and banks fear this scenario because it will reduce the trust in the financial sector of a country. The result of a bankrun is often that many people will lose some and in cases even all of their money on deposit. To prevent this from happening with FBME customers, the Central Bank of Cyprus appointed an Administrator who will guide the complete process where FBME is currently in. The FBME bank account rescue mission is set up to help FBME customers get their money back.

It is uncertain if and when this system will collapse. The USA has huge debts, the Euro faces difficulties now Greece might get into default again and Russia gets into labor problems as well. A bankrun is never the solution. If we keep this in mind, there are ways to get things under control.

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