Generations of movie audiences have learned the basics of how banks manage deposits and make loans from watching the bank run scene in the holiday movie classic It’s a Wonderful Life.
As George Bailey tells the worried customers storming Bailey Building and Loan, their money isn’t sitting in a vault. It’s in their neighbors’ homes, financed by mortgages held by George’s small bank.
The emotions driving the people of Bedford Falls to demand George return their money are universal and can be shared by the customers of financial institutions, says Argo Pro’s Mary Henderson, senior vice president, head of financial institutions.
“The minute they catch wind of something negative, such as interest rates going up, the markets tend to react immediately,” she says.
Such scenarios highlight the need for risk management in financial institutions.
“If you are managing a client’s investment portfolio and there is a negative stock market impact, you may see redemptions and people wanting their money back,” she says. “You tend to get lawsuits then. You will get people who will sue because they feel you weren’t managing their retirement money the way you should have.”