One of the great things about Diamond-Dybvig is that it immediately punctures any superficial notion that a bank can be defined by some traditional appearance — that it basically has to be a marble building with rows of tellers, i.e. a depository institution. Any arrangement that borrows short and lends long, that offers investors claims that are liquid while using their funds to make illiquid investments is a bank in an economic sense — and is potentially subject to bank runs. Indeed, what we had in 2008 was mainly a run on shadow banks, on non-depository institutions.
It is much more accurate to say that non-bank, or shadow bank, regulation that failed.
Or even, that shadow banks didn\’t have deposit insurance and so were prone to liqudity problems…..