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Panicked Australians have been rushing to withdraw cash – 'into the millions' in some cases – as markets tank

Jack Derwin
  • The Reserve Bank of Australia (RBA) has acknowledged that some wealthy Australians withdrew sums in excess of $100,000 and in some cases in excess of $1 million last month as economic fear abounded.
  • In response the RBA had to coordinate with bank branches and cash transit companies to ensure adequate supply.
  • While it says the surge in demand for cash has abated, it demonstrates the level of financial anxiety in Australia, as unemployment grows and businesses shut amid the coronavirus shutdown.
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Australia had something of a bank run in March but you'd be forgiven for missing it.

On Thursday, the Reserve Bank of Australia (RBA) revealed there had been a rush of Australians desperate to withdraw their money from the bank as hundreds of billions of dollars were wiped from the Australian stock market, and trillions more from global markets.

"Over-the-counter withdrawals of cash from banks were elevated over the second half of March as some customers with large balances sought to hold precautionary funds," the RBA surmised in a report.

"This included a small number of customers making very large withdrawals -- more than $100,000, and in some cases into the millions of dollars," it said.

While the financial regulator buried this tidbit in the middle of its 30-pages financial stability report, it's a reflection of just how anxious some people have become over recent weeks, as economies wobble and unemployment soars.

On a larger scale, a bank run threatens to bleed banks dry. If customers demand more cash than the bank has on hand, knowing deposits are loaned out, then panic can break the bank, so to speak. Typically runs on deposits are associated with significant financial disruption, such as during the Great Depression.

While history is ripe with examples, and while Australia does not lack a healthy suspicion of banks, the RBA has been quick to assure this activity had been short-lived in Australia.

"The Reserve Bank worked closely with the large banks and cash-in-transit companies to ensure branches had sufficient cash supplies," it said, focusing on restocking those branches that began to run low.

"The elevated demand has since abated."

A similar event happened in 2008 when the financial crisis began to unravel, with some US banks eventually folding altogether. The then-Rudd government had to implement a government guarantee on all bank deposits up to $250,000 -- a guarantee which exists to this day.

The major difference is that in 2008 and 2009 banks had been at the heart of the problem plaguing financial systems, having booby-trapped economies with bad debts. This time around, however, Australia's banks have been central to buffering the financial system by offering loan deferrals as well as increased lending to ensure money keeps flowing through the economy.

Cash included of course.