🏦 Bank Run — Fractional Reserve Crisis

What It Demonstrates

This simulator models a bank run in a fractional-reserve banking system. Each bank keeps only a fraction of deposits as liquid reserves, lending the rest. When depositors lose confidence and rush to withdraw, the bank may run out of reserves and fail. Failed banks trigger interbank contagion — linked banks lose their interbank deposits, potentially cascading into a systemic crisis. Activating deposit insurance slows or halts the panic by restoring depositor confidence (the Diamond-Dybvig insight).

How to Use

• Click Start Panic to trigger a run on a random bank.
• Watch contagion spread through interbank links (grey lines).
• Toggle Deposit Insurance to see how it stops the cascade.
• Adjust Reserve Ratio — higher reserves = longer survival.
• Increase Contagion Speed to see faster systemic collapse.

Did You Know?

The classic bank run model by Diamond & Dybvig (1983) showed that bank runs are a rational self-fulfilling prophecy: if you believe others will withdraw, it's rational for you to withdraw too — even if the bank is fundamentally solvent. Deposit insurance (like FDIC in the US or ФГВФО in Ukraine) breaks this cycle by guaranteeing deposits up to a certain amount.