Re:(FinTech) Synapse has collapsed, 10M consumers, 100s of f...
by fauigerzigerk on Sunday May 26, 2024 @05:31AM
(#40480811)
>This is exactly why banking regulations (e.g., FDIC) were invented.
No it's not. FDIC deposit insurance was invented because no amount of due diligence can stop a bank run once it has been triggered somehow, and no amount of due diligence can stop domino effects.
For banks to serve their purpose of accepting deposits and make loans that cannot be called at a moment's notice, you have to accept that even the best run banks are exposed to this sort of risk.
Systemic risks simply cannot be handled at the level of individual banks. It's a structural feature of the banking system.
No it's not. FDIC deposit insurance was invented because no amount of due diligence can stop a bank run once it has been triggered somehow, and no amount of due diligence can stop domino effects.
For banks to serve their purpose of accepting deposits and make loans that cannot be called at a moment's notice, you have to accept that even the best run banks are exposed to this sort of risk.
Systemic risks simply cannot be handled at the level of individual banks. It's a structural feature of the banking system.