Latent Fragility and Clustered Withdrawals in Dynamic Banks Runs
Theoretical Economics
2026-07-24 v1 General Finance
Mathematical Finance
Abstract
Using a mean-field game framework, we study a dynamic model of bank runs in which more withdrawals raise the risk of bank failure. Even though depositors receive gradual and idiosyncratic shocks, withdrawals occur in clusters. The main mechanism is latent fragility: run-prone depositors accumulate gradually over time and may prefer to wait individually, but they withdraw together once collective exit becomes self-fulfilling. We establish equilibrium existence and characterize earliest-run and latest-run equilibria. The clustering mechanism arises whether depositor heterogeneity is discrete or continuous. A common aggregate state coordinates withdrawal timing and leads to a unique threshold equilibrium.
Keywords
Cite
@article{arxiv.2607.22317,
title = {Latent Fragility and Clustered Withdrawals in Dynamic Banks Runs},
author = {Jodi Dianetti and Giorgio Ferrari and Yunzhi Hu and Hao Xing},
journal= {arXiv preprint arXiv:2607.22317},
year = {2026}
}
Comments
67 pages, 5 figures