[collectedparts]

It's called "narrow banking" or full-reserve banking.

It's been tried, and was rejected by the very same regulators who now had to bail out SVB: https://www.econlib.org/why-does-the-fed-oppose-narrow-banki...

[afiori]

> A narrow bank takes deposits and invests the money in interest-bearing reserves deposited at the Fed. Because that’s all these banks would do, they would be very low cost and hence could pass along to depositors the interest earned on reserves, minus a small fee. Narrow banks could attract many large depositors, who currently receive much lower interest rates on their deposits at ordinary commercial banks.

This does not sound like keeping all the cash in a vault, this looks like reselling a service of the government not meant for this use.

It could be interesting to see if a service oriented to very low interests (or even negative) rates would be (in theory) feasible.