Northern Rock Crisis

I am in two minds about how customers have reacted to the Northern Rock being given credit by the Bank Of England.
On the one hand you can see that your average customer would realise that other customers might panic and take their funds out. They would then realise that if enough customers do this then the bank starts to have real problems. So it may well be the rational course of action in this circumstances to withdraw your funds as soon as possible if you foresee a run on a bank like that.

On the other hand a run on a bank only starts because people react in this way. If people reacted rationally they would understand that their money is at no risk and that if they all act calmly then the crisis will pass very quickly.

But - we know that not everyone is rational. We know that some people will panic and once they do then the logic of the situation seems to compel others to follow suit.

A strange situation then - one where to do the irrational thing seems to be the rational course of action and the rational course of action may not be the rational thing to do. Banking is essentially built on sentiment and trust. Once this is lost then the rational course of action for the system as a whole is not necessarily the same as the rational course of action for the individual depositor.