What occurs during a bank run?

During a bank run, a large number of customers withdraw their deposits simultaneously due to concerns about the bank's solvency or financial health. This situation typically arises when depositors lose confidence that the bank will be able to return their funds, leading to a rush to access their money before it is too late.

In response to this panic, banks may struggle to meet the withdrawal demands because they usually keep only a fraction of their deposits on hand as cash. The lack of liquid reserves can exacerbate the situation, potentially leading to the bank's failure if the run is severe enough. This phenomenon underscores the importance of deposit insurance, as it can help maintain public confidence in the banking system and prevent such runs from occurring.

The other options provided do not accurately describe the dynamics of a bank run. For instance, transferring deposits to another bank does not demonstrate the urgency of a bank run, while a significant increase in bank profits or a rise in loan interest rates is unrelated to the immediate financial pressures that characterize a bank run scenario.