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It would be great if we could link a particular season or, why not, a Moon cycle, to the incidence of bank failures as we'd be able to do a "dot plot" and anticipate and prepare for the next one in good time. Unfortunately, there are no hard a fast rules on timing of bank failures. They occur gradually, unbeknownst to the public, and then suddenly (breaking news). The only sure thing is they will continue happening in the future. Examining and learning from past bank failures deepens our understanding of the underlying causes and mechanisms of deposit outflows during bank runs, and respective policy implications. The enclosed paper (ECB Working Paper Series) by Ulrich Bindseil and Richard Senner is an excellent resource for those interested in the subject of deposit outflows and bank runs (https://lnkd.in/dtVEVcMJ). The authors note the March 2023 demise of a number of US regional banks and CS due to rapid and large deposit outflows, suggested that contrary to expectations, the additional regulatory frameworks introduced after 2008, notably in the field of liquidity requirements, have not overcome the problem of bank runs and the need for central banks to act forcefully as lender of last resort. The paper examines in detail where bank deposits flow to and distinguishes the different flow of funds mechanics across all possible destinations. Moreover, it reviews each current and prospective future factors that may contribute to the observed increase of the speed and size of deposit outflows. Furthermore, the authors highlight the prospects of new forms of money, including means of payments issued by EMIs, narrow banks, or stablecoins and central bank digital currency (CBDC), to further threaten the stability of cheap bank funding via sight deposits in the future, potentially weakening the business model of commercial banking and its relative importance for financial intermediation. #deposits #bankfailures
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It's springtime and that means bank failure season has arrived... Last week Republic Bank announced that Fulton Financial has acquired all of its $4 billion in deposits via the Federal Deposit Insurance Corporation (FDIC) https://lnkd.in/e3qQbeWe Around this time last year, we also lost Silicon Valley Bank, Silvergate Bank, Signature Bank and First Republic Bank As the bank failures spread, the Fed kindly turned on its magic money printer under the Bank Term Funding Program (BTFP), a euphemism for yet another bailout In the year that the BTFP was active, banks "borrowed" just over $160 billion from the Fed, helping to prevent further bank runs https://lnkd.in/eMbx-mZ6 The BTFP is now closed, however, so we can expect to see more bank failures in the coming months... Powell even said so himself back in March, but he also said it will be smaller, regional banks that will fail, so no need to worry!