David Apgar on how to make banks more stable
It’s time for broader thinking on “narrow” banks, says the former policy adviser to the US Treasury
THE THREE big American bank failures this year, set to cost the Federal Deposit Insurance Corporation an eye-watering $35bn, were all, in their own way, one-off misadventures. Silicon Valley Bank had credit risk under control, but there’s no guaranteeing the price of long-term bonds when interest rates rise—a problem when you hold $91bn of them. Signature Bank was no more typical: most banks don’t owe 30% of their deposits to cryptocurrency companies. First Republic was an outlier in a different way, with 68% of its deposits above the federal-insurance limit.
From the August 12th 2023 edition
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