In this article, I want to talk about the event that immediately preceded the passage of the Federal Reserve Act, namely the banking panic of 1907, since many legends and rumors have been created around this event that conspiracy theorists use in their theories.

It is known that the panic itself began immediately after the collapse of the large trust company "Knickerbocker Trust Company". In various conspiracy theories, it is alleged that this company was deliberately bankrupted after spreading rumors that the company was on the verge of bankruptcy, after which investors flocked to collect their deposits. In particular, this theory was voiced in a documentary directed by Peter Joseph called "Zeitgeist" (Zeitgeist).

So what really happened?

In fact, the emergence of the crisis in 1907 was strongly influenced by two events that happened long before that:

1. The first blow to the American economy was dealt by nature, namely the terrible earthquake in San Francisco on April 18, 1906. Although the epicenter of the earthquake was in San Francisco, in addition to San Francisco, other nearby cities, such as San Jose, Santa Rosa, etc., were also affected. In Monterey County, for example, the earthquake changed the course of the Salinas River forever near its mouth. As a result of this earthquake, more than 3,000 people died, more than 300 thousand were left homeless. The economic damage was enormous. Insurance companies were forced to make huge payments, many of them went bankrupt. This could not but affect financial markets. Here is what the "Financial Times" wrote about this on July 6, 1906:
   

   $200 million ash heap in San Francisco will cause hardship that will be felt in all financial markets for many months

2. That same year, another disaster struck. European banks raised the discount rate, resulting in a liquidity shortage, which in turn resulted from the fact that huge funds were directed to the reconstruction of San Francisco after the earthquake, there was an outflow of money from American financial markets.

The fact that these two events are connected and directly influenced the emergence of the crisis of 1907 is proved by economists Kerry A. Odell and Marc D. Weidenmier in their work entitled "Real Shock, Monetary Aftershock: The 1906 San Francisco Earthquake and the Panic of 1907" ("The Real Shock, Currency Aftershock: The 1906 San Francisco Earthquake and the Panic of 1907"). Here is what they specifically write:

In April 1906, the San Francisco earthquake and fire caused damage equal to over 1 percent of GNP (gross national product). Although the real effect of this shock was localized, it had international financial repercussions: large quantities of gold flowed into the country in the fall of 1906 as foreign insurers were forced to pay insurance premiums to their clients in San Francisco. This outflow prompted the Bank of England to take discriminatory action against US finance and, along with other European central banks, to raise interest rates. Such policies pushed the United States into an economic recession and set the stage for the Panic of 1907.

Further:

The actions of the Bank of England and other European central banks attracted gold imports and drastically reduced the flow of gold to the United States of America. As of May 1907, the United States was in one of the shortest but most severe recessions in American history. Thus, the prerequisites for the emergence of a financial crisis were created. The already weakened world markets collapsed in October 1907 with the collapse of the Knickerbocker Trust Company in New York."

This is the picture of the crisis that really emerges.

Now specifically about the banking panic. For more details of its origin, see Lessons from the Panic of 1907. In this article I will briefly outline all the circumstances of those events.
In fact, the panic did not start with the fact that someone spread some kind of rumors, but with the fact that the Knickerbocker Trust Company, or rather the company's president Charles T. Barney, made a deal with speculators - the brothers August and Otto Heinze, as well as Charles Morse with purpose, as they say in American sources, "cornering the market" copper producer company - "United Copper".
I've highlighted the words "cornering the market" specifically to explain what that means. The site "InvestorWords.com" gives the following definition:
"The illegal practice of attempting to purchase a sufficient amount of a commodity or security to manipulate its price."
Translation:
"illegal the practice of trying to acquire enough of a product or valuable papers to manipulate their price."
In short, as they say now, it was blowing a soap bubble.

So what happened next? Before continuing, I would like to make one clarification:
There is an organization in the USA called "Clearing House". The "Online Business Dictionary" website gives the following definition:
"Affiliated agency or a facility operated by banks within a geographical area to act as a central site for collection, exchange, and settlement of checks drawn on each other."
Translation:
"An affiliated agency or institution used by banks within a geographic area to act as a central hub for the collection, exchange, and redemption of checks drawn by banks to each other."
In addition, there is a body called "Clearing House Committee", which controls the activities of banks in the region.

So, further, as a result of the fact that the speculators either miscalculated the consequences, or greed ruined, but the bubble burst, and United Copper shares plummeted in price, causing the collapse of everything stock market. Everything would not be so terrible, if not for one circumstance. The fact is that August Heinze, among other things, was the president of the Mercantile National Bank. Since the case was publicized after the stock market crash, depositors flocked to the Mercantile National Bank to withdraw their deposits. (In English, this situation is called "bank run" or "run on the bank").
After that, the Clearing House Committee urgently appointed a commission that was supposed to investigate all the circumstances. After the commission finished its work, the Clearing House Committee decided to provide assistance to the Mercantile National Bank, but on the condition that August Heinze resign from his post. In addition, Charles Morse also had to leave all his posts that he had previously held in various banks. Naturally, both met these requirements and the bank was saved.

And now directly about the Knickerbocker Trust Company:
Since the Knickerbocker Trust Company was not a bank, and as its name implies, Trust Company (Trust Company), therefore, its activities were not subject to regulation by the Clearing House Committee. On the other hand, since the trust companies were not banks, they could not pass their checks through Clearing House, so they used intermediary banks. For the Knickerbocker Trust Company, the intermediary was the National Bank of Commerce. So, as soon as the findings of the Clearing House Committee were made public, the board of directors of the Knickerbocker Trust Company demanded that Barney resign. Soon, the National Bank of Commerce announced that it would not accept Knickerbocker checks. It was this decision of the National Bank of Commerce that caused the panic.

In 1907, their (the Knickerbocker Trust Company) funds were used by the company's then president, Charles T. Barney, to increase the value of copper through "cornering the market". This gamble was unraveled by dumping millions of dollars into the copper market to stop a hostile takeover by a completely different entity. This became public knowledge, and on October 21, the National Bank of Commerce announced that it would stop accepting checks from the Knickerbocker Trust Company, causing a panic among depositors who began to demand their funds back. Charles Barney requested a meeting with JP Morgan to discuss bailouts for the bank, but JP Morgan turned him down. Because of this and the failure of the bank, he shot himself on November 14, 1907.

In conclusion, I would like to clarify the situation with the fact that JP Morgan refused to help the Knickerbocker Trust Company. In fact, on October 21, Morgan called all the company's management and asked them to provide the company's financial statements in order to make a decision on the provision of assistance based on them. However, this was not done in a short time, and without this information, Morgan refused to provide assistance.
By the way, Morgan himself also suffered from the crisis. For example, the shares of his company "U. S. Steel" fell more than 50%, and yet he still had enough funds. But an example of someone who benefited from this crisis is described. When the panic arose, huge queues formed outside the banks, and some people sold their place in line. Maybe it was they who staged this crisis in order to earn money in this way? I think this hypothesis can also form the basis of a conspiracy theory.

Today I would like to talk about banking crisis(or the crisis of the banking system), and specifically about what should investors do when he comes. This question is often asked to me, so I will try to consider it in this publication. I will say right away that it is quite difficult to give any precise advice here, after all, a lot depends on the specific situation, the specific bank, the specific depositor. But still I'll try.

So, what should depositors do when a banking crisis hits?

First of all, let's define what kind of crisis we are talking about. I mean the crisis of the banking system, as one of the components of the general, the next rounds and aggravations of which we have seen quite often in recent years. First of all, the banking crisis is characterized by following points:

– Growth in loan defaults;

– Outflow of deposits;

– Liquidity problems;

– Problems with cash;

– Lack of currency for sale;

– Bankruptcy of banks, revocation of licenses;

– The emergence of all kinds of restrictions both at the level of banks and at the state level, etc.

A banking crisis can be observed quite often recently: about once every 4-6 years, in different countries - in different ways. And each time, to one degree or another, panic arises: what should investors do, will the money be lost? Different people act in such a situation in different ways. Observing the actions of people during the crisis of the banking system, I came to the conclusion that there are 3 main categories of depositors:

1. Alarmist. Depositors in this category begin to panic even when the banking crisis has not yet arrived. They tend to be far from financial sphere, are guided by some rumors, talk that a banking system crisis is coming and all the money will “burn out”. Even if banks do have certain problems, alarmists always exaggerate them and rush to disseminate information about the imminent collapse of banks or a particular bank, which fuels the excitement among other representatives of this category of depositors. Such people, when the first negative news appears, without even waiting for their confirmation, are in a hurry to produce, for example, with the money received (it is more reliable this way).

The alarmist’s favorite expression is “we have already been taught by bitter experience”, they will never forget the deposits of the Sberbank of the USSR, which they lost themselves, or their parents, these people do not trust banks in principle, and everyone is always told that banks are evil, but why they still hold on to it. For the sake of interest, of course ...

2. wavering. Depositors from the category of hesitant when a banking crisis comes or approaches will constantly monitor all the news, often call and come to their bank and ask: “Well, how is it? What do you hear?" There, of course, they will be reassured: “They say, everything is fine.” They will be satisfied with such an answer, but in a few days they will contact again: “But they wrote there ... And I heard ... And how are you ...? Well, if anything, you tell me right away ... ".

As a result, it comes to the point that the banking crisis is aggravated, any restrictions on the withdrawal of deposits are introduced, or serious problems begin for the bank in which the deposit is located, up to the introduction of a temporary administration or even bankruptcy, and the depositor begins to bite his elbows: “Here, it was necessary ... As always ... So I need it ... ”.

3. Unwavering. There are fewer investors of this type, but they also have a place to be. Whatever happens in the banking system, they will not panic and rush to terminate deposits. Their motto is “be what will be”. The unshakable believes that even if the bank goes bankrupt, he can count on, and in any case he will be able to return his money, so he has no reason to worry. And the fact that there is a devaluation or something else is not scary: somewhere you will lose, but somewhere you will earn.

Sometimes the reason for such “indifference” is a really correct understanding of the situation, sometimes it is a feature of the character of a particular person.

What do you think depositors should do if there is a banking crisis? Which of the proposed scenarios should be followed? Now take a critical look at yourself: which of the described types are you?

This I described as most often happens at the time of the onset or even the approach of a crisis in the banking system. All 3 categories of depositors, in my opinion, act incorrectly. The first ones will suffer losses due to early termination, the second and third ones will not be able to withdraw their money on time, and their return will be delayed for an indefinite period, or maybe not at all. This is due to the low level.

People simply do not know how to behave in this or that situation during a banking crisis, so they often repeat actions after someone else, or fall under the influence of the “crowd effect”, which only make their modest contribution to aggravating the crisis of the banking system. I think no one doubts the fact that in many respects the banking crisis is created by people themselves, in particular by depositors who are trying to quickly withdraw their money from the bank. It has been calculated that if a bank loses at least 20% of its deposits in a short period of time, then it will simply no longer be able to fulfill its obligations to customers and will collapse.

Now every depositor probably thought: well, so why should I wait until these 20% are accumulated, and the bank collapses - it's time to run and take your money! That is why, among other things, banks are collapsing. Then what should investors do, how to do it right?

First of all, it is necessary to understand that banking crisis is always temporary. The whole economy is built on the cycle of processes: bottom-rise-peak-decline-bottom. And the banking system is no exception: history has proven this many times. Within each cycle, which can last for years and even decades, there are mini-cycles. Therefore, crises of the banking system of different scales will always happen from time to time, you need to understand this and take it for granted.

The next point: you need to learn to identify real ones and understand how serious they are. For example, if a banking crisis occurs, absolutely all financial institutions experience problems, but some of them continue to operate as usual, some impose certain restrictions for a while, and only a few cannot withstand the crisis and go bankrupt.

That is, the crisis of the banking system is, as the name already suggests, a systemic phenomenon, and it does not pose any particular danger to depositors if the bank in which the deposit is placed is not among those on which this crisis has a particularly detrimental effect. . Unless, in some cases, difficulties of a temporary nature may arise. For example, a ban on early termination of deposits, setting restrictions on cash withdrawals, etc.

Temporary measures are always aimed at supporting and stabilizing the banking system, they are introduced just in the interests of depositors, and not vice versa, and this should be treated with understanding.

To reduce the likelihood of events developing according to the most negative scenario, you need to think about this at the stage of placing a deposit:

- First, choose only ;

- Secondly, to conduct (or, as it sounds more familiar, not to store all the eggs in one basket).

As practice shows, everyone knows this, but as a result, they still carry all the money to one bank that offers the most. Perhaps it will blow over ... And then, when the banking crisis comes, they are tormented by the question “what should depositors do?”.

To avoid early termination of deposits, it is also necessary to take care of this in advance: if you see that the situation is unstable and a banking system crisis may arise, do not open deposits for long periods, limit yourself to monthly or three months. And if the situation begins to worsen, instead of reissuing the deposit for a new term, transfer the money to a demand deposit. By the way, since such deposits are recorded in the bank on other balance accounts, then, as a rule, measures to block early withdrawal of deposits do not apply to them.

In any case, there is no need to panic. Panic never leads to anything good, but only aggravates the situation, especially when it comes to mass panic.

If each depositor starts with himself and restrains his panic in the event of a banking crisis, the banking system will survive this crisis faster and easier and begin to function normally.

Even if your bank is declared bankrupt, you are still entitled to receive compensation from the depositor protection funds that are available in almost every country. It just might take a while.

And if you are still very afraid of losing money, then you don’t need to invest it anywhere. Because risks are always present, even when investing in bank deposits. But then you will gradually lose them due to depreciation. By the way, do not think that if you keep money under your pillow, say, in dollars, then they do not depreciate. Depreciate, and how! (I wrote more about this in the article). So, to have the risk of loss, which can be minimized by choosing reliable banks and diversifying, or definitely lose a little - of course, it's up to you.

By the way, experienced investors, and just financially literate people in the midst of a banking crisis, do not take money from banks, but, on the contrary, open new deposits in reliable banking institutions. Because at this moment, deposit rates always rise and you can earn more than usual. If there are doubts about the stability of the bank, you can open it for the minimum possible amount, and then, when the situation begins to stabilize, replenish it with a large amount and receive interest more than the current one at that time. Take note.

You have received some information about what depositors should do, how to behave in a banking crisis. I hope she helps you in some way. See you soon at a website that aims to improve your financial literacy and teach you how to use your personal finances as intelligently and efficiently as possible.

Expenses for liquidation of the consequences of major crises, which began with banking panics, in the period 1970-2007. averaged about 13% of the affected country.

The most famous theories explaining the causes of bank panics are the “sudden withdrawal theory”, based on the Diamond-Dibwig model, and the theory based on the analysis of information received by depositors about the solvency of the bank (developed by S. Jacqueline and S. Bhatacharya), in accordance with which the probability of a bank panic depends on the signals that market participants receive, as well as on the strategy they choose.

The Diamond-Dibwig model was developed in 1983. It is based on game theory and takes into account the circumstances in which the demand for liquidity can lead to the withdrawal of deposits from the bank. In a situation of simultaneous withdrawal of funds by a large number of depositors, the bank, as an intermediary between borrowers and creditors, may be unable to make these payments. Therefore, banks are forced to transform illiquid assets into liquid liabilities. At the same time, the relationship between depositors is considered as a coordinated game in two equilibrium states: when no one withdraws their funds from the accounts, being sure that everyone does this, and when everyone seeks to withdraw money from the account, because he believes that all depositors will try to withdraw their saving.

Usually, a bank, when attracting resources from various sources, counts on a low probability of withdrawing funds in a short period of time, believing that not all account holders will want to exercise their right to a refund at any time. Therefore, the bank issues loans for a long period, reserving relatively small amounts to make payments to depositors upon their request.

During a banking panic, this equilibrium is disturbed. Banks cannot quickly repay long-term loans. Therefore, if all depositors simultaneously wish to return their deposits, then the supply of liquid funds will quickly dry up. The bank will have time to pay only the first depositors who applied to the bank, and if other creditors insist on the return of their contributions, it will become bankrupt.

Thus, even healthy banking institutions are potentially susceptible to banking panics. Having succumbed to the banking panic, depositors seek to both get ahead of and imitate each other. The Diamond-Dibwig model assumes that each contributor who seeks his contribution expects other contributors to do the same. If savers were guided only by their own needs for funds, then there would be no panic outflow of funds.

In practice, banks, in the event of a massive outflow of funds, close cash desks and refuse to issue deposits in excess of the established limits, motivating this by the need to wait for the receipt of money from repaying loans. However, D. Diamond and F. Dibvig believe that limiting the payment of deposits is not the best solution. the best way solution to the problem is government-supported or central bank. If depositors are confident that they will get their money back from the account, then they will not participate in "raids" on the bank. Deposit insurance is a more effective way to prevent bank panics than stopping payments to depositors. It was precisely with the aim of preventing mass early withdrawal of funds by depositors from banks in 1930 that the United States developed and introduced a mechanism for insuring (guaranteeing) deposits.

However, the emergence of these mechanisms has given rise to the problem of unpredictable behavior of economic entities: being insured, depositors tend to place deposits in riskier institutions that offer higher interest rates. In addition, it turned out that in each country the funds accumulated by the deposit guarantee funds are not enough to compensate all depositors in the event of a systemic crisis. Therefore, many countries often resort not to paying compensation to depositors who have suffered as a result of bank failure, but to transferring such deposits to other banks.

According to the Diamond-Dibwig model, the early withdrawal mechanism works well under normal conditions. Problems arise when contracts are simultaneously broken by a critical mass of depositors, since this requires the bank to sell its assets at a loss. A series of sales of pledged assets occurs on the market, and this leads to a fall in their prices. As a result, all market participants bear losses, and many bank borrowers become insolvent.

For the first time, bankers encountered such a situation during the banking crisis in the United States in 1907, when one of the large banks was forced to sell on the stock exchange the shares of the creditor company pledged under the loan, which led to. After the banking panic of 1907, the Federal Reserve System was created, which began to act as a lender of last resort.

A banking panic can start by hearsay, but even if some depositors know that this is not true, they will still be afraid that the majority of depositors will believe it and start to panic. Researchers believe that it is the asymmetry of information about the state of the bank that generates the panic behavior of depositors. The Diamond-Dibwig model assumes that in a banking panic it would be logical for private depositors to participate in a "raid" on the bank, despite the fact that this may lead to its collapse. In this situation, the “prophecy comes true” model, developed by the American sociologist R. Merton, is triggered precisely on the example of a banking panic.

There are several types of banking panic:

1. at the level of an individual bank, a group of banks and the banking system;
2. among the managers, shareholders and depositors of the bank;
3. among the bank's counterparties (lenders and borrowers).

At the level of an individual bank, a significant withdrawal of funds with a reduction in the inflow of new deposits can occur with a neutral reaction of market participants. In the literature, this type of banking panic has been called a "bank run". Sometimes the bank manages to compensate for the outflow of funds by attracting the same or new money on less favorable terms (renewal of contracts for a short period, at an increased rate, etc.). However, market participants may consider the increase interest rates compared to the market as a negative signal.

The simultaneous and massive withdrawal of money by depositors from their accounts is due to their lack of confidence in the bank. The paradox is that an increase in the outflow of deposits in itself can lead the bank to a loss of solvency. The more depositors withdraw funds from their accounts, the higher the probability of bank defaults on its obligations, stimulates further outflow of money.

The "money flight" from a particular bank may be caused by customers' fears that given bank may be closed by the regulator (license revoked, operations restricted), or doubts about the willingness of shareholders and the state to provide support to the bank in a difficult situation. For example, in Russia, the banking panic in the summer of 2004 was provoked by rumors about the involvement of a number of banks in money laundering.

Banking panic can develop into a banking crisis (or be part of it), characterized by a deep breakdown of the banking system.

A mass withdrawal of money from bank accounts at a particular bank can be caused by a combination of macroeconomic and microeconomic factors:

• economic downturn expectations;
• reports of bankruptcy of a leading bank;
• publication financial reporting bank with negative results;
• spreading rumors about problems in the bank;
• confidentiality of information about the bank;
• bringing senior bank managers to court or investigation;
• delays in bank payments;
• the growth of problem assets of the bank and the like.

IN modern conditions banking panics can be exacerbated by the use of electronic tools. Thus, the use allows you to withdraw money from any bank, increases tension in the entire banking system and can threaten solvent banks.

The first banking panic in Russia can be considered the events associated with the bankruptcy of the Moscow joint-stock Commercial Loan Bank, which in October 1875 announced the termination of the issuance of deposits. Upon learning of this, the deceived depositors unsuccessfully stormed the bank, demanding money. This story inspired the artist Makovsky V.E. to create the painting "The Bank's Collapse".

The collapse of the Commercial Loan Bank was caused by abuses on the part of its leaders, who issued a loan in the amount of 8 million rubles. to the Prussian adventurer Bethel Strusberg for a project related to the construction railway. The loan was secured by shares worth only 1 million rubles, which, as it turned out later, had no real value and were not even included in the quotation lists on the stock exchanges. The collapse of the Commercial Loan Bank gave rise to a chain reaction of withdrawals of deposits and even bankruptcies in other regions of the Russian Empire.

In 2007-2008 pp. There have been banking crises accompanied by banking panics in many countries. In Ukraine, banking panic led to the collapse of several banks, unable to cope with the withdrawal of funds from their depositors. Banking panic began with “raids” of Prominvestbank depositors on ATMs of this and other banks. This panic was quickly contained by selling the bank to a Russian investor. However, the problems of the Ukrainian banking system did not end there. At the end of 2008, problems began with Ukrprombank, which in mid-2008 began to attract deposits at inflated rates (market rates were at the level of 17%, while Ukrprombank offered 21-23%). In January 2009, he also introduced a six-month moratorium on satisfying creditors' claims to Ukrprombank. After the publication of this information, depositors of Ukrprombank were seized by a banking panic. Queues formed in bank branches. The government considered the option of nationalizing the bank, but in July 2009 it was decided to liquidate it.

The main measures to prevent and eliminate the consequences of a banking panic

At the state level:

• stimulation of economic development;
• ensuring financial stability, preventing crises;
• creation of a reliable deposit guarantee system.

At the mesolevel (banking system):

• periodic banking system;
• management improvement ;
• increasing requirements for banks and strengthening;
• introduction of a moratorium on the payment of deposits before maturity;
• transfer of deposits from bankrupt banks to more reliable ones;
• reorganization of insolvent banks;
• information support from outside, etc.

At the micro level (separate bank):

• creation of an additional liquidity buffer;
• introduction of restrictions on early termination of the deposit and withdrawal agreement;
• establishment of a commission or reduced interest rates for early withdrawal of deposits;
• increasing interest rates on deposits and reducing their terms;
• creation of pools of banks for mutual support;
• increase in jobs in bank branches for the payment of deposits;
• strengthening information and explanatory work among contributors.

The key factors in preventing a banking panic, reducing its scale and duration are restoring market confidence in the banking system, supporting its liquidity, and ensuring the independence and transparency of the central bank.

The Bank of Russia, apparently, took the situation under control, making it clear that it would spare no expense to save large banks, but would continue to mow down small ones, whose exit from the market could not provoke a serious crisis

When Alfa Capital analyst Sergei Gavrilov sent his now-famous memo to VIP clients on August 15 about problems in the so-called Moscow Ring banks, the difficulties experienced by large Russian banks were widely known. But few people then could have imagined that the 6th and 11th largest banks in the country in terms of assets would collapse and be saved by the Bank of Russia, and the banking crisis would take organizations whose assets exceed 10% of the Russian banking system, with the exception of Sberbank, out of the market.

Today, when the short-term crisis, apparently, is behind us (as far as one can judge, the Bank of Russia intends to move from a potentially “corruption-generating” bailout scheme to bailing out troubled banks through the Banking Sector Consolidation Fund), it is worth assessing its causes and thinking about the prospects for the development of the Russian banking sector. systems in the coming years.

Bankers' mistakes

In my opinion, the banking crisis in Russia, which, in fact, has been going on for several years and to which almost 400 banks have become victims, was almost inevitable and was caused by four main circumstances.

First, the whole ideology of the banking business was focused on fast the economic growth, abundance investment projects, a high rate of return and, accordingly, a willingness to raise expensive money. Starting from 2013-2014, however, the economy entered a period of stagnation and then a recession. The most profitable spheres were finally state-owned; consumer demand has declined; construction began to balance on the verge of profitability. Banks faced a lot of cases of foreclosure on collateral, which, due to the changed value of assets, could not compensate for losses in the loan portfolio. From an economy in which the conditions were dictated by the creditor, there was a transition to one where a reliable borrower was on horseback, but in conditions of stagnation he had no chance to expand production and, accordingly, the need for loans. The stagnation of the stock market and the decline in yields on government debt added a touch to the sad picture. Against this backdrop, tighter regulation limited banks in a number of operations and increased the cost of doing business.

Secondly, the cost of funding has increased significantly. After 2014, foreign lending practically ceased, and the obligations themselves became much more onerous due to the devaluation of the ruble. As a result, many private banks have switched to borrowing from domestic market super-expensive money, the possibility of risk-free investment of which was minimal (a classic example here is the Yugra bank). The deposit insurance system played rather a negative role in pumping such banks with liquidity, since government guarantees allowed depositors not to analyze the degree of riskiness of their investments. As a result, a huge bubble of excessively expensive deposits has formed in the Russian banking system, which even now does not look completely blown away, therefore it will certainly present a lot of surprises.

Third, in a deteriorating market environment, banks have become the centerpiece of financial abuse. We are talking about the cashing out of funds and money laundering, and their withdrawal abroad, as well as unlimited financing of projects by bank owners, and the conspiracy of owners and clients to jointly embezzle funds. Again, the Bank of Russia, with its rehabilitation program, also played a not the best role here, since the measures it took made it possible to recapitalize banks and return funds to large customers, although their placement was obviously associated with excessive risks (Roskosmos and Fundservisbank come to mind here, "Lenenergo" and "Baltic", as well as other similar cases). The opportunity for owners and top managers to leave the country with impunity (just take the cases of Andrei Borodin from the Bank of Moscow and Georgy Bedzhamov from Vneshprombank) only stimulated such behavior of financiers.

Finally, fourthly, one cannot ignore the unnecessarily risky, even without signs of any violation of the law, business strategy of some entrepreneurs who considered that the time of crisis was ideal for rapid expansion. In recent years, the Otkritie banking group has been developing due to the indefatigable absorption of competitors: Shield Bank, RBR, Sverdlovsk Gubernsky, Novosibirsk Municipal - that was a "trifle". Then came Trust, Nomos Bank, Petrocommerce and Khanty-Mansiysk Bank. Just a week before the actual bankruptcy, Otkritie sent an application to the FAS for the acquisition of one of the largest non-state pension funds- LUKOIL-Garant, so the business owners were not going to change their style of behavior in the market. Considering that in many cases the acquisition of banks, some of which were in a difficult financial situation, was financed by the Bank of Russia through the DIA, it is worth considering the Central Bank to be partially responsible for this problem as well.

Regulator errors

In other words, most of the causes of the current banking crisis are quite objective, and in almost every one of them there is an element introduced by the supervisory authorities.

Today it can be stated that from 2013 to the summer of 2017, the Bank of Russia, having sanitized 35 banks and liquidated 346, spent an astronomical 2.7 trillion rubles on this process, which is almost equal to the federal budget deficit of Russia for 2016 and is half of the current government reserve funds. As a result, many banks “packed” for reorganization returned to the jurisdiction of the Bank of Russia already through the actual bankruptcy of the largest banks such as Otkritie and BIN. The lesson worth 3.5% of GDP has come to fruition, and, as we have already noted, now the Banking Sector Consolidation Fund will lead the recovery of banks. In its basic idea, the fund repeats the actions of the US Treasury and the Federal Reserve, tested, and quite successfully, in 2008, when the state acquired control over financial institutions, established their activities, cleared the rubble and then sold them on the market (from the implementation of this scheme in relation to corporation AIG, the American budget received $ 23 billion in profit in 2008-2012).

State final

The consequences of the dramatic events of the fall of 2017 seem rather predictable to me. With the introduction of the new scheme and the allocation by the Bank of Russia to Otkrytie and BIN of amounts comparable to those spent on the rehabilitation of the banking system over the past few years, a new mechanism for preventing problems appears, and it will be used more than once. Therefore, most likely, the difficulties of the banks being rehabilitated will not become a trigger for problems even in Promsvyazbank and MCB, which are close to them, and in general banking market relative calm will return. Unlike many experts who expect a new wave of bankruptcies by the end of 2017, I am a supporter of a softer scenario. The Bank of Russia, to all appearances, will spare no expense to save significant credit institutions, continuing to mow down small banks, whose exit from the market cannot provoke any serious crisis.

If you try to look at a more distant perspective, it does not look as rosy. It seems to me extremely doubtful that the regulator will be able to bring the same sanitized Otkritie to the market in the coming years in an attempt to sell it at least with a minimal profit (I remind you: as of the end of September, the Central Bank injected more than 1 trillion rubles into the bank, while at the beginning of the year, before all the now obvious problems appeared, Otkritie was valued by the market at $3.92 billion, or almost 4.5 times less). This means that the costs of direct reorganization will ultimately either be transferred to the budget, or financed by issuance, or partially offset by the sale of the rehabilitated banks to state-owned banks. The cleanup of small banks will also lead to the flow of deposits and accounts to government-controlled financial institutions.

Increasing competition, digitalization of business and the client's interest in the widest range of services provided will also work in favor of the largest banks, as a rule, involving significant state participation. The result is clear: by the beginning of the 2020s, when the current wave of reforming the banking system in Russia is generally completed, it will turn out to be much more stable than today, but will become almost completely state-owned, which, it seems to me, will be most of the domestic "business ".

Vladislav Inozemtsev Director of the Center for Post-Industrial Society Studies

Banking panic refers to the situation when depositors quickly and massively withdraw their cash from one or more banks. Most often this ends with the collapse of the credit institution. 0ffbank.ru

A banking panic is a complex phenomenon, the consequences of which can not only destroy a particular credit institution, but also cause serious harm to the country's economy, and sometimes the global financial system.

According to studies by IMF specialists, the state eliminates the consequences of banking panics at the expense of approximately 13% of GDP. This causes serious damage to the country. In the modern world, increased panic is possible due to the use plastic cards and other electronic instruments. They increase tension throughout the financial system, posing a threat to even the most solvent banks. This is due to the fact that even the daily expenses of a person using non-cash payment methods are related to the bank's performance, and this only increases anxiety.

Varieties of banking panic

There are the following types of banking panic:

• among borrowers and creditors of one bank;
• among the management, shareholders and depositors of the bank;
• at the level of one or more credit institutions or the entire banking system.

Panic can cause a banking crisis. At the same time, the mechanisms collapse financial system there is an economic downturn.

The relationship of financial institutions

Panic from one bank can very quickly spread to other lending institutions. Perfectly healthy organizations can suffer from this. This is due to the close relationship of debt obligations between all credit institutions. The larger the bank, the more likely it is that panic will spread to other institutions. offbank ru

It is very difficult to predict the possible consequences in another bank, because financial relations between organizations are not linear.

Why do people begin to massively withdraw their deposits from banks

Active withdrawal of money from the accounts of a credit institution is usually due to a combination or one of the following macro- and microeconomic factors:

• disclosure of the bank's financial statements showing negative results;
• major litigation with bank executives;
• payment delays;
• lack of any information about the bank;
• possible economic downturn in the country;
• information about the bankruptcy of the country's main credit institution.

Mathematical model of banking panic

In 1983, a mathematical model of a banking panic was published. It was developed by two American scientists - Philip Dibwig and Douglas Diamond, however, we did not find reliable data about who they were, only a lot of the same information, which we briefly reflected here. After studying many factors, they concluded that the collapse of the bank is not always under control. Bankruptcy can be caused not only by the quality of assets and the level of work of specialists. Actually, you don't have to be a scientist to understand this.

Even a rational depositor who understands the pointlessness of withdrawing funds from a reliable bank, succumbing to general panic, may think about withdrawing deposits. By withdrawing money from his accounts as quickly as possible, he will only increase mass unrest, without wanting to. https://www.site/

Is it possible to prevent a banking panic

Today, there are 3 levels of measures that can reduce the likelihood of a banking panic:

State level. The main tasks of the country are:

• deposit insurance;
• maintaining financial stability in the country;
• implementation of measures aimed at developing the economy.

The level of the banking system. This group of activities includes:

• development of mechanisms to manage the liquidity of the financial system;
• serious control over the activities of banks;
• assistance in the reorganization of insolvent credit institutions;
• transfer of deposits from bankrupt commercial banks to more reliable organizations and others.

Individual bank level. Such activities include:

• creation of cash reserves and other liquidity buffers;
• growth of interest on deposits;
• improvement of work with clients (information support, clarification);
• creation of a pool together with other banks and others.

Banking panic can be eliminated by restoring public confidence in the country's banking system. It is important that the Central Bank does not depend on credit organizations and private interests.

The role and responsibility of the media

Mass media (media) play no small role, if not a key one, and that is why it is important that the mainstream media be under reasonable state control. It is the media that are able to stop panic of any kind and have more than once solved such problems at the proper, professional level. //www.site/

Search engines and news aggregators

At the same time, close attention should be paid to Internet search engines, large news aggregators, which, despite the fact that they themselves do not create news, can quite flexibly and effectively regulate and shape public opinion in a fairly short period of time, as well as blogging platforms, social networks and individual visited resources. Like the media, all these resources can play both a negative and a positive role.

US banking panic of 1907

The US financial crisis of 1907 is considered one of the largest banking panics in world history. The country at that time was in a serious economic recession (slowdown in growth), people withdrew their funds from trust funds and credit institutions. As a result, the confidence of New York banks among depositors was undermined, liquidity seriously decreased. The situation was complicated by speculation on the stock exchange. All this contributed to the growth of anxiety among the population.

People withdrew funds from one bank to another. Major trust companies and credit organizations went bankrupt. Later, the population withdrew money from regional banks, losing confidence in any financial institutions.

The panic was stopped by influential US financiers who pledged their own funds in order to stabilize the situation in the country. https://www_site/

The first banking panic in Russia in 1875

The first banking panic in Russia is considered to be the bankruptcy of the Moscow Joint Stock Commercial loan bank in the autumn of 1875. Then the state was also called the Russian Empire.

The reason for the panic was the announcement of the institution to stop issuing funds to depositors. The insolvency of the bank was caused by the dishonesty of the leaders who issued a loan in the amount of 8 million rubles. The loan was secured by shares in the amount of 1 million rubles, but they also had only a nominal value.

The ruin of the Commercial Loan Bank on the basis of the "domino" principle led to the collapse of many credit organizations in other regions of the Russian Empire.

2008 global crisis

In 2008, the world felt the consequences of a serious global crisis that began in the United States due to a large number of unpaid mortgage loans. First, there was a decline in oil prices. American investors began to sell shares, bonds, raw materials (primarily oil). In autumn due to the outflow of funds investment bank Lehman Brothers filed for bankruptcy. Then the crisis worsened.

This situation threatened the inevitable bankruptcy of most Russian banks. Many owners sold their credit organizations for nothing. To avoid a massive outflow of money from the largest banks, many of them began to raise deposit rates. This helped keep most of the contributions within the organization. The State Duma then increased the volume of insured payments by 300 thousand rubles (up to 700,000 rubles, by the way, similar measures were taken in 2015 and today the insured deposit amount is 1,400,000 rubles).

Together, these tools helped to significantly reduce the panic among the population and stabilize the situation in the country.

Other states, Ukraine in particular, also suffered from the global crisis of 2008. There, the banking panic assumed rampant proportions. In the summer of 2009, Ukrprombank went bankrupt.

Kaliningrad banking panic of 2013

In December 2013, the Central Bank revoked the license from Investbank. Many savers and pensioners of Kaliningrad wanted to withdraw their money. They failed to do this. Banking panic swept the entire population of the city. People, by inertia, hastily began to withdraw their money from other credit institutions.

Local authorities claimed that there was no mass outflow of funds. To reduce losses commercial Bank The European one introduced a daily limit of 10 thousand rubles. Serious problems at that time were experienced by ten regional banks. It was possible to contain the panic due to the support of the Central Bank and the Russian media.

Realities of the present time. 2016

In the autumn of 2015, the Central Bank of the Russian Federation estimated the volume of household deposits. Only in October the number of investments decreased by 0.1%. The situation affected even the largest banks in Russia.

Most deposits were withdrawn from Alfa-Bank in October. The total loss of this credit institution is 15.6 billion rubles. Gazprombank (minus 6.2 billion dollars) and Raiffeisenbank (minus 6.1 billion rubles) were seriously affected. Uralsib lost 10 billion rubles.

This outflow of funds is explained by the complex economic situation in the country, the constant decline in oil prices. The global crisis, which began in 2008, continues to this day. https www site

At the beginning of 2016, consumption volumes dropped sharply in the country, people today prefer to save their money. On the one hand, this has a positive effect on banking sector, since there is no outflow of the population's finances. On the other hand, a reduction in consumption slows down the development of the country and prevents the economy from developing. The situation is rather ambiguous. Much today depends on the policy of the state and the measures taken. And our bank will help you choose