Jun
26

Bank Run 101

Bank Run 101: Spaniards withdraw euros from Spanish banks and deposit them in German banks. Since Spanish banks still have the same loans outstanding, they go to the Spanish Central Bank for loans. Since all Spanish banks need money, the SCB borrows from the ECB which then borrows from the Bundesbank — because German banks are flush with Spanish deposits — to lend to the SCB which lends to Spanish banks.

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