Danatbank was Germany's second-largest bank — a single rumor killed it in 1931

The Danat-Bank (Darmstädter und Nationalbank) was formed in 1922 from the merger of Darmstädter Bank and Nationalbank für Deutschland. By 1930 it was Germany's second-largest joint-stock bank, with 2.4 billion Reichsmarks in deposits. Its chairman, Jakob Goldschmidt, had pursued an aggressive strategy of holding large amounts of German industrial stocks rather than maintaining liquid reserves — a bet that worked in good times but left the bank dangerously exposed.

In June 1931, rumors spread that a major Danatbank client — the Norddeutsche Wollkämmerei & Kammgarnspinnerei (Nordwolle) — was insolvent. Depositors rushed to withdraw their money. The bank had little liquidity because its assets were tied up in stocks that were plummeting in value as the Great Depression deepened. Within days, the run spread to other German banks, triggering a systemic crisis.

On 13 July 1931, the German government declared a bank holiday and forced Danatbank to merge with Dresdner Bank. The collapse was one of the most prominent European banking failures of the Great Depression. It deepened the economic crisis in Germany, contributed to the collapse of the Weimar Republic, and demonstrated how a single rumor could destroy a bank that had 2.4 billion Reichsmarks in deposits but not enough cash to meet a single day's withdrawals.

Its assets were in stocks that collapsed, leaving no cash for withdrawals; a rumor about one client's insolvency caused a run that destroyed it in three weeks.

Danatbank held its assets in German industrial stocks instead of liquid reserves. When the Great Depression hit, the stocks collapsed and the bank had no cash to meet withdrawals.

A rumor about one client's solvency triggered a bank run that spread to the entire system. Three weeks later, Danatbank was gone — a reminder that banking is built on confidence, not balance sheets.

The bank's strategy of using deposits to buy stocks was a bet on the German economy that failed catastrophically when the Depression arrived. Depositors were not insured and lost everything.

A bank that holds stocks instead of cash is not a bank — it is a bet on the market. Danatbank had 2.4B Reichsmarks but could not pay a day's withdrawals — its assets were in collapsed stocks.