The banking system depends on the fact that banks only hold a small portion of customer deposits in cash that is ready to pay out. The rest is invested or passed on to other customers as loans at from 20% or 25% interest, while the banks pay very small interest to depositors, 1% or 5% interest only maximum. Now when those loans do default and when a bank run occurs, (that is the customers with deposits run to the banks to withdraw their full deposits because of fear and non-confidence in the banks) this act lands every bank in the world in trouble -- even the healthiest ones.
Crisis of Confidence
Fears of Bank Runs Mount in Southern Europe
By Stefan Kaiser