If some people don’t pay back their loans, then that loan gets written down, so the bank has fewer assets than before. A certain level of default is expected and baked into their operations.

If many people don’t pay back their loans, the bank no longer as as many assets as it expected. But it still has as many liabilities. The value of the bank will decrease, potentially to nothing.

As the grandparent notes, banks are subject to special requirements in law that define how much capital the bank needs to have to remain solvent. If the bank is no longer solvent then it can’t cover the liabilities (deposits).

In that case either the government will step in to bail the bank out, or the bank will collapse and the depositors will have to be paid from a deposit insurance scheme.