[notmindthegap]

Maybe a stupid question: if banks can collapse from a bank run, shouldn’t the entire model be questioned? A bank run is simply when a threshold number of customers decide to withdraw their cash, with every right to do so. With social media + frictionless mobile banking, the entire notion of teetering your model on mitigating the risk of a “bank run” seems anti-customer, regressive, and unsustainable.

[benchaney]

SVB didn’t collapse because of the bank run. There was a bank run because they collapsed. It is true that the bank run may have accelerated the collapse slightly but they were in really bad shape before it started.

A lot of people want to blame depositor panic, but I don’t think that is really fair. In a properly managed bank, the assets exceed the liabilities, which means that if people want their money out, the bank can liquidate their assets to pay them and still have money left over. SVB’s assets are worth far less than their liabilities (to the tune of nearly $100B dollars by some estimates). Panicking depositors didn’t cause that.

[notmindthegap]

I’m not blaming depositors. In fact, I think depositors have a right to panic withdraw. They’re making a decision to take business elsewhere, as they should.

That that can cause or accelerate collapse makes me question the entire bank model.

What other model leads to instant death, damage to their entire customer base, and collateral damage to the broader system, when a certain number of customers decide to go elsewhere?

[itsoktocry]

>How can a business model rely on this?

Customers also want to earn easy, high interest, that's the main issue. You're taking a risk (albeit a small one) with your deposits; your money is being lent by the bank and they pay you interest in return.

If you only want your cash to be held safely, put it in a safety deposit box.

[notmindthegap]

How many people are actually parking their money at a bank to earn high interest? My guess is for most, the safety deposit box is their bank account.

[macinjosh]

Give me a break, no one is getting high interest returns from their cash savings account. A pittance is given to savers so banks cause my money for lending. Yet, when I want to borrow money from the bank on their credit card the interest rate is in the double digit percentages.

[ec109685]

Precisely: “At the end of 2022, SIVB only offered 0.60% more on deposits than its peers as compensation for the risks illustrated below; in 2021 this premium was 0.04%.”

[mixdup]

a safety deposit box is not safe by a long shot. if the bank burns down you're screwed. safety is the $250k FDIC limit, period

[yCombLinks]

Most depositor's money is insured by the government, so there is no reason people would panic withdrawal their money

[LandR]

In the UK, you are only covered up to £80k though... I could understand people wanting to get at least money over £80k out, but also how long does it take to get access to your cash if you have to go through the government insurance procedure. Is it days, weeks, months ? I have no idea and wouldn't want to have to find out.

[mghfreud]

But if they panic, bank will go down.

[Gare]

Yes, the alternative is CBDC (central bank digital currency). But it also has its problems.