“I’m so confident that X is solvent that I’m giving X a bunch of money, for solvency” seems a bit odd to me.
If everything is fine, why would any of this be necessary?
If everything is fine, why would any of this be necessary?
We over optimize when things are good and then wonder what happened when there's a pothole. of course people are fickle and of course rates are going to change. Not being prepared for this is irresponsible.
All banks are vulnerable to a bank run, no matter how well they’re managed.
I agree with you though, SVB (and some others) failed in their risk management. Partly due to relaxed regulations I suspect.
However that doesn’t mean all the banks made the same mistakes. It’s easy to see why people are worried but a panic will only make things worse.
We've seen stuff like this pretty recently in other venues; people were getting into fistfights over toilet paper in 2020. It didn't mean we'd always be short on toilet paper; it was a panic and short-term issue.
The bank doesn't have your money in the vault, it's been lent out to other customers. Their loans can be in good standing and the bank can be perfectly solvent - but they can still have a liquidity issue if everyone wants to take out their deposits at the same time.