There is a physical element to the archetypal bank run. First of all, you have to get to the bank. Then you have to queue. Then you need to carry or wheelbarrow your money out of the building.So what happens to bank runs when banks, like everything else, become websites? The FT digs in to a report on how those risks might become more acute with the onset of Open Banking.
An important lesson from the Home Trust incident is that third parties may be highly motivated to move money away (or encourage their deposit clients to do so) from a potentially troubled institution at the first hint of any problems, no matter how strong the deposit insurance scheme or the resolution toolkit. Why? Because no intermediary wants to risk its reputation by having to explain to its depositor clients why their money is on deposit with a troubled institution even if the risk of actual loss is virtually nil. Thus, I would not be surprised if smaller institutions find their deposit bases become less sticky over time and more likely to run at the first hint of troubles.