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A comment on U.S. FDIC tells Signature crypto clients to close accounts by April 5. Parent comment

Re:U.S. FDIC tells Signature crypto clients to close account... by kasey_junk on Tuesday March 28, 2023 @10:35PM (#35351539)
Narrow banks are only protected from credit and interest rate risk. Operational risk is still a concern and one that brings down many traditional banks.

If a manager runs off with 9% of the funds, or if other liabilities cause the bank to be insolvent a bank run is still possible and an orderly receivership would be needed to ensure that depositors were paid out before other creditors.

Deposit insurance is one of the mechanisms that the banking system use to pay out depositors swiftly (usually next business day after receivership). Traditional bankruptcy proceedings could leave depositors waiting for years for their funds, which is a reasonable risk to be concerned about.

[ Parent | on HN ]
Re:U.S. FDIC tells Signature crypto clients to close account... by zarzavat on Tuesday March 28, 2023 @11:52PM (#35352215)
Is there no organizational structure that can solve this? For example, have two entities: a backend entity for deposits (a trust), and frontend entity for the day-to-day administration of bank activities, such as marketing etc.
[ Parent | on HN ]