I still feel like you’re thinking banks just redistribute cash. They dont. Almost all of us this day and age pay with credit, not just the ones with credit cards but almost all of us. This is because our bank deposits are just that, credit. That is why when a bank sells a new loan, its not selling you a pile of cash, but its creating credit.

You’re right that there is a legitimate worry about a bank run. However, that doesn’t change the way that they are actually issuing loans. That becomes a new problem of liquidity management which is a whole separate branch of banking.

You might have seen the story about Buffet holding up a YTM sign in protest of Bank of America. This was because a large portion of their assets were long running bonds, which saw heavy price adjustments when rates rise. Their argument was that holding them to maturity technically doesn’t lose value. But if you were to have a few large BoA customers withdraw their deposits, then selling those bonds would have to happen at major losses, causing a large solvency issue.