A Bank Run…

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How would you as a foreigner deal with a bank run in Korea?

All the economic indicators point to a not very bright couple of years ahead:

  • Unemployment is rife
  • Birth rates are low
  • Pensioners are on the rise
  • Jobs are scarce
  • Wages have stagnated
  • Exports are down
  • The Economic Forecast is Bleak
  • The PGH Government is unable to affect any real policy change
  • There are bubbles in various sectors of the economy
  • Companies are surviving on barely serviceable debt
  • Households are living far beyond their means

Need I go on as to why you should think about how to handle a bank run?

The Northern Rock Bank Run

Northern_Rock_Customers,_September_14,_2007Northern Rock a British bank in the north of England was hit hard by the popping of the property bubble back in 2007/8. As fears grew among the public of the security and stability of the bank, a bank run started that eventually took down the bank.

Queues formed at ATMs, and then as these ran out of cash, branches were filled with angry customers trying to get at their life savings.

It was not very long before the vaults at the Northern Rock banks were empty, the bank had to be bailed out and then went into receivership.

Could a Bank Run Happen Here?


Although there would be different initiating factors, the root cause would be the same. That root cause of a bank run is the fact that banks always try to make money by gambling on asset purchases. These may be mortgages or loans to companies, but they all work out to be the same thing.

For a bank run to occur several things have to fail at the same time, and as much as I hope it doesn’t happen, it is certainly worth thinking about and preparing for.

Those that had worked and saved hard were facing the very real fact that their savings would be wiped out.

How Does a Bank Run Start?

Suddenly is the best answer to this question. The problem boils and simmers for months, distrust builds and then one story, one spark of fear causes people to panic.

During the Northern Rock bank run, people were standing in lines for hours, just to get to the counter to find out their savings were unavailable, and they were out of luck.

  • Would you be able to line up for hours outside a Korean Bank and contend with jostling ajummas?
  • Would you have the luxury of time off work?

As expats we love to live in other countries and experience new cultures, but it’s also usually for the financial side too.

Why Does a Bank Run Happen?

Logically it shouldn’t really be a problem. The bank holds people’s money right?


This is basic stuff, but the financial system we have enables banks to only reserve a portion of deposits and then loan the remainder out to other customers.

But it is not quite that simple either, this system, that the whole world uses is called the fractional reserve system and it essentially goes like this:

  1. When you deposit money the bank needs to only keep a fraction of it available as cash.
  2. Your account still shows the full amount or $100
  3. (Under a 10% reserve ratio for every $100 you deposit it must keep $10)
  4. It can then lend out the remainder ($90) to a new customer.
  5. When they deposit it the process repeats but their account also shows the full amount of $90 so on account there is now $190
  6. This process can and does repeat until that initial $100 can multiply to $1000, on account. But there is still only $100 physical cash available.

It is for this reason – the fractional reserve banking system that it is unlikely that you will be able to access your savings should there be a bank run.

Is there an Expat Safeguard to a Bank Run?

There are several ways to safeguard your hard earned money from a bank run:

Withdraw Excess Cash

Most of us save our excess cash in the bank for safe keeping – but that only works when you are getting interest on it. No interest / not enough to keep up with inflation means there is no real reason to keep cash in the bank. Take your excess cash out of the bank and store it at home in secret.

Invest in Assets

Trade your cash for an asset.

Send Money Home

However, in the current economic situation, the chances of a bank run may be equally as bad at home.


Bank Run




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