My Bank Run Stopper
My solution to the problem of bank runs, that is, sudden increases of withdrawals caused by fear that a bank will become insolvent, requires some changes in regulations – but let's assume that's doable.
Here's my idea...
When, according to pre-set standards, a bank declares itself to be in danger of a run, all withdrawals become subject to a penalty, let’s say five percent, for the duration of the run.
All the money from the penalties goes into a bonus fund, with bonuses paid to the patient depositors who did not succumb to the fear of insolvency.
I wouldn’t know where to start in effecting the regulatory changes my bank run circuit breaker would require. But it does seem as though it would solve the problem.