How might asymmetric information cause a well-managed bank to be aband

How might asymmetric information cause a well-managed bank to be abandoned by its depositors?

What will be an ideal response?

ANSWER

Bank depositors know little about their bank’s lending practices, except when a particular bank fails. Depositor’s at other banks have to wonder whether their bank is safe, which comes down to whether other depositors believe the bank to be safe. In the absence of credible deposit insurance, any depositor who is unsure that other depositors will keep their funds in the bank must, rationally, withdraw her funds. If enough depositors do so, the bank has failed.