Smaller banks are vulnerable to bank runs. So a lot of banks during crisis (before FDIC / Centralized Banking in the USA) would close up to stop bank runs.
Closing up shop during a bank run only made people angrier, and exacerbated the problem. What was invoked as a solution, was for every bank in the nation to be FDIC insured by the central bank.
The smaller and more decentralized banks are, the more frequently the bank-runs are, forcing the small banks to close to protect themselves.
Smaller banks are vulnerable to bank runs. So a lot of banks during crisis (before FDIC / Centralized Banking in the USA) would close up to stop bank runs.
Closing up shop during a bank run only made people angrier, and exacerbated the problem. What was invoked as a solution, was for every bank in the nation to be FDIC insured by the central bank.
The smaller and more decentralized banks are, the more frequently the bank-runs are, forcing the small banks to close to protect themselves.