The Role of the Central Bank in Banking

The role of a central bank is to loan money to banks in distress so that there is a bank run and avoids this economic contagion. The catch is that lending of last resort is supposed to mean that you lend to banks that are solvent and they're just illiquid. So very often what happens is that the reason why depositors run on the bank is because it's no longer clear that the bank is solvent.