Analysis of Techniques to Prevent Bank Run

Bank runs can be considered as one of the bad effects of financial crises, which is very important to confront. Present paper investigates the ways to confront runs on banks. Meanwhile it provides an analysis about the financial crisis in 2008. Using approaches provided in Diamond & Dybvig paper (1983), a model is provided to analyze means and policies applicable to manage assets and liabilities, and to reduce the bad effects of runs on banks. The research method is analytical. The research investigates specifically three

“contract of lags in deposit withdrawal”, deposits insurance” and “central bank loaning”. The results show that liquidity crises and bank runs cannot be prevented by using these methods; rather these methods can only delay these crises, or in case of confrontation with these crises can reduce the intensity of damages. The model provided in this paper can be a basis for the development of complementary researches about the bank run problem in interest-free banking system in this transition period and the existing banking system of Islamic Republic of Iran.