Definition of “Run”
Banking
In the context of banking, a “run” refers to a situation where a large number of depositors withdraw their money from a financial institution simultaneously. This mass withdrawal can lead to the collapse of the bank, as happened with many banks during the Great Depression of the 1930s. A run on a bank typically occurs due to a loss of confidence in the institution, often triggered by large loan losses or fraudulent activities.
Computers
In the realm of computers, to “run” means to execute a software program or perform a specified routine. When a program runs, it carries out a series of operations according to the code instructed in the software. This is a fundamental activity in computing, underlying all productive use of computers.
Examples
Banking:
- Historical Example: During the Great Depression, numerous banks faced runs as panicked depositors attempted to withdraw their funds all at once, leading to widespread bank failures.
- Modern Example: A recent example occurred during the 2008 financial crisis when Northern Rock, a financial institution in the UK, experienced a bank run leading to its eventual nationalization.
Computers:
- Running a Program: When you click to open your web browser, an executable file runs initiating the program.
- Automated Tasks: Using a script to automate routine data backup processes on a server involves running that script according to a predetermined schedule.
Frequently Asked Questions (FAQs)
Q: What causes a run on a bank? A: A run on a bank is commonly triggered by a breach of depositor confidence, often due to large loan losses, fraud, or general rumors about the bank’s insolvency.
Q: How can banks prevent a run? A: Banks can prevent runs by maintaining high levels of liquidity, fostering strong communication and trust with their depositors, implementing deposit insurance schemes, and other regulatory frameworks.
Q: What happens when you run a computer program? A: When you run a computer program, the system processes the executable code instructions, performing tasks as directed by the software.
Q: Are all banking runs catastrophic? A: While runs can lead to significant financial instability and even bank failure, regulatory measures like the Federal Deposit Insurance Corporation (FDIC) in the U.S. can mitigate these effects.
Related Terms
Banking:
- Liquidity: The ability of a bank to meet its financial obligations as they come due.
- Insolvency: A state where an institution’s liabilities exceed its assets, leading to an inability to pay off debts.
Computers:
- Executable File: A file that is capable of being run or executed as a program on a computer.
- Script: A series of commands executed without user interaction, often to automate tasks.
Online References
- Investopedia on Bank Runs
- The Great Depression - History
- Computer Programming Basics - W3Schools
- Executable Files - Techopedia
Suggested Books for Further Studies
- Banking and Financial Institutions: A Guide for Directors, Investors, and Borrowers by Benton E. Gup
- The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It by Anat Admati and Martin Hellwig
- Structure and Interpretation of Computer Programs by Harold Abelson and Gerald Jay Sussman
Fundamentals of Run: Banking and Computers Basics Quiz
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