Re:FDIC Takes over Silicon Valley Bank
by jellicle on Friday March 10, 2023 @02:46PM
(#35099839)
Well, yes, if your bank is receiving too many deposits and you didn't want to be vulnerable to a SVB-style failure, then you could:
- set your rate of paid interest on demand deposits quite low - what's going to happen, some people will pull their deposits? That's fine, that's what you want.
- re-deposit those excess deposits at other banks, taking only their meager interest payments on demand deposits
The math here works fine. As long as there's some difference between the rate you're paying on deposits and what you're getting, no matter how small, you're fine. And if you need cash quickly, hey, those are DEMAND deposits at other banks, you should be able to withdraw them immediately. You can spread the risk of a run on your bank around to every other bank.
- set your rate of paid interest on demand deposits quite low - what's going to happen, some people will pull their deposits? That's fine, that's what you want.
- re-deposit those excess deposits at other banks, taking only their meager interest payments on demand deposits
The math here works fine. As long as there's some difference between the rate you're paying on deposits and what you're getting, no matter how small, you're fine. And if you need cash quickly, hey, those are DEMAND deposits at other banks, you should be able to withdraw them immediately. You can spread the risk of a run on your bank around to every other bank.