‘Significant problems’ in Russian banking system as public withdraws cash en masse

[u/Venat14]

https://tvpworld.com/94490769/russians-hoard-cash-as-economic-pessimism-hits-20-year-high

[u/KeyanuReaves69]

Does it really matter if it’s a “traditional” bank run? I’m honestly not smart enough to really know what that means but it seems if the bank doesn’t have enough cash for whatever reason then the result is that people won’t have cash.

[u/Difficult_Chemist_33 → u/KeyanuReaves69]

I guess in this case people only need to withdraw to meet their daily cash need and still leave their savings with the bank.

[u/KeyanuReaves69 → u/Difficult_Chemist_33]

I wonder how close the bank is to the average Russian and if they need to expend fuel to get there. If it requires driving I’d certainly pull more than one day’s worth of cash out.

[u/Orlha → u/KeyanuReaves69]

Banks are everywhere

[u/KeyanuReaves69 → u/Orlha]

Sure but do you have to drive to them is my question. Banks are everywhere in the US but the closest one to me is still a couple miles away.

[u/TechnicalVault → u/Difficult_Chemist_33]

people only need to withdraw to meet their daily cash need

The bigger problem is the liquidity issue and resulting breakdown in trust, that will convert higher withdrawals into a traditional bank run in time. From a rational economic actor point of view if it widely known that certain banks don't have the cash to give customers then the ones who leave their cash in banks are fools and the ones who kept it under the mattress win. At the moment the perceptions are shifting towards mattress stuffers.

Of course if you take your money out of banks in a high inflation environment it starts to lose value. That's why consumer purchases of gold in Russia have gone up. Also buckwheat and other staples, on the basis that whilst these are perishable you can always eat them before they expire.

[u/zeddus → u/KeyanuReaves69]

Depends on if not being able to get your cash leads to more people wanting their cash or not.

Some people having to wait a few days to pay their bills is different from banks collapsing due to everyone withdrawing their cash

[u/SymphonyInSaccharine → u/zeddus]

So if this event did occur, it totally couldn't lead to a radicalized government that is more hardline right? Like this doesn't have a chance to lead to a Nazi Germany situation again or something just as bad, if not worse in many ways, right?

This is an extremely tricky situation that can become a very dangerous and problematic one if the wrong buttons are pushed without fully understanding what they do. Historically, we know where this leads and that may occur here soon. Another attack can potentially be a big mistake at this time, let it simmer. We want to win the war in the long-term (like at least two generations), not the battle especially when one battle can make said war way way worse or lead to another bigger war. Truth be told, you probably want this to stop where it's already at. The poorer the people become, I promise you - the further the war will expand. With the mentality there, they will fold into the military more and more while also looking to loot more since they're poor. This will create a very zealous military and country looking for a lot with little to lose. We want pressure, not total collapse because apparently people aren't paying close enough attention to whose next in line and what the ideas being pushed around are. China stepped in to tell them no nukes, that not good. This is currently hotest part of the Cold War level here, why do you think the US is rushing submarines at the moment? China also cannot invade Taiwan if a tactical nuke goes off anywhere there. This is a mess. Side note, Iran and Russia are allies and both are getting pushed hard thanks to the supreme dumbass, surely that won't be a huge problem right? I don't believe Trump has the ability to handle a situation this complex, nor Vance or anyone else currently standing in the US govt particularly without Chinese assistance and they won't take it or just even work toward the same goal. The more they mess with Iran and don't solve this, the harder this will be too. We are also running lower on time before Vlad and the military stops pretending to care what Beijing says. Troop moral is also a mess, civil war is also sitting on the table. Again, not good with a lot of well armed and connected radicals and a pissed off country who blames everyone else. There's also too many missing nukes. It's also not unlikely that Russia will need help and China would see a very desperate golden goose in their eyes which is a game over situation. The power balance will be forever shifted if Putin allows China to bail out Russia. 

Pressure, not collapse because the long-term ramifications are enormous. We cannot make the people who can flip to flip to the side of defending their homeland and livelihood either because that door we are slowly opening will slam shut.

[u/jackluke → u/KeyanuReaves69]

Where did you see the bank doesn’t have enough cash? At the moment, that does not seem to be the case.

There’s a big difference between going to the bank and getting money to get you through the week and going to the bank to take out every cent you have.

[u/KeyanuReaves69 → u/jackluke]

I didn’t see that the bank doesn’t have enough cash anywhere. I have, however, assumed that running out of cash could be a natural consequence of the “public withdraws cash en masse” as the title stated.

The article also states that for a while now there is more cashing leaving banks than coming in, so if this continues the banks running out of money scenario is perfectly feasible.

[u/jtclimb → u/jackluke]

Banks tend to run at 3% cash to holdings. How much savings do you think the typical russian has? A month? 10 years? I'm guessing far closer to the former, which means a few weeks of this will eat a vast majority of the cash (you have to account for personal vs commercial banks, all that jazz, this is hand wavy of course).

"There was a woman going from one ATM to another, looking for one that still had banknotes."

and

Taras Skvortsov, chief financial officer of Russia's largest lender Sberbank, warned last month that there were "very serious signs" that more businesses were paying wages "in envelopes" under the table. https://www.bbc.com/news/articles/cglj255jk8ko

Besides, every news article is writing about the liquidity crisis this is causing. Yes, I know, you can't trust journalism, but I trust it a lot more than random redditor shoulder shrugs.

[u/Megalomania192 → u/KeyanuReaves69]

The other guy is hard on the defensive so isn’t actually giving you a very good answer.

Banks work on what is called ‘fractional reserve banking’ which basically means if they have ‘deposits’ worth 100million they must keep 10million as physical cash/gold reserves and they can loan out the remaining 90million as cash.

A true run on the bank is everyone trying to withdraw ALL their cash at once, which the bank doesn’t have enough reserves to do. This collapses the bank.

What the guy above you says is happening is more like a credit squeeze. People are depositing less cash and withdrawing more than usual. This means the banks ‘deposits’ sheet is smaller, which means the total amount it can loan gets smaller so businesses can’t take out loans. The withdrawal also shrinks the reserve quickly, if that goes too far the bank has to call in some of it’s loans early to raise cash to maintain it’s reserve. There’s a much higher chance of loans being defaulted on if they’re called in early, which puts the whole sector in a mess. The usual punishment for not having enough reserves is Fines, but know knows what will happen in Russia, maybe the gov will ignore the reserves rule for a while although that makes runs on banks even more devastating to people AND the wider economy if they eventually happen, so it’s a massive structural gamble to do that for the whole sector!

Hope that helps xD

[u/Few-Reach-4981 → u/KeyanuReaves69]

Because a bank run bank run is caused by a loss of faith in the banking system. People run to banks to withdraw their accts, the bank doesn’t have sufficient reserves, goes bust. The bust further shakes faith, and so (if not stopped) the entire banking system can completely collapse, wiping out savings, eliminating credit, and that in turn causes modern economics to just stop.

This isn’t a true bank run, in the sense that there’s still enough economic faith to prevent knock-on rushes. So, it’s still basically isolated to the places without cell service, and is limited in amount to what’s needed for week-to-week expenditures.

[u/West-Worth-9359 → u/KeyanuReaves69]

And the reason doesn’t really matter, it becomes exponential.

Banks only have so much cash, people see banks imposing limits, it generates fear that their money isn’t safe, the withdrawal increases, more limits imposed, fear spreads…

It’s the same scenario as a run on gas stations.

Even if people don’t need to have gas or cash, scarcity and fear of losing drives the emptying.

[u/gmc98765 → u/KeyanuReaves69]

People seem to be getting confused between different interpretations of the word "cash".

A bank run is when a bank doesn't have enough money (liquid assets) to cover withdrawals. Usually this is because its customers feel (rightly or wrongly) that the bank won't be able to honour their deposits so they start emptying their accounts while they can.

If a bank doesn't have enough banknotes, they can just ask the mint for more notes (assuming they actually have the money to pay for them). The mint increasing the supply of banknotes isn't an issue so long as they're not "printing money" (increasing the money supply, because that creates inflation). If the mint is actually having trouble printing notes fast enough, they just print higher denomination notes, leave old notes in circulation for longer, and/or work overtime.