> Now, if the risk-free rate is negative, you might reasonably ask: Why doesn't the bank just keep cash? And the answer to that is that they're legally prevented from doing so.

Some cursory research suggests this is not the case. The Federal Reserve website states: "Depository institutions must hold reserves in the form of vault cash or deposits with Federal Reserve Banks." [0]

[0] https://www.federalreserve.gov/monetarypolicy/reservereq.htm