No, they are more prone to runs because there is no central bank to bail anyone out
Ask HN: Are there banks/crypto companies immune to bank run?
11–20 of 51 posts
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#12Most people are well under the insurance limit and would rather bank for free than pay fees.
This. The fees to cover the bank branches, the online banking system, atm usage etc. would have to be huge.
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#13Imagine if there was one. In the scenario where there was a bank run on anybody, this hypothetical bank would be more reliable than the government itself and would end up storing all the money available and bankrupts literally everybody else.
Such an outcome is undesirable, so this type of bank isn't allowed.
If you meant a bank that is guarenteed to recover money up to a certain amount, standard FDIC protections have you covered.
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#14It pains me that even on hacker news (a more sophisticated discussion destination than most) most people who are replying didn't read the body of the message and just saw "are there banks/crypto cos immune to bank run" and just blurted out their usual response "no central bank to bail anyone out" or "banks earn money by investing / crypto has no FDIC".
OP is explicitly asking what if banks (tradfi) or crypto cos held assets 1:1 and charged fees as operations rather than invest funds. The question isn't so much around tradfi vs crypto but inclusive of both, that can a bank business sustain this way or not.
I don't have answers but I have a feeling a bank/crypto bank like this would attract far fewer regular customers to be able to sustain running it, like a couple of replies said.
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#15It pains me that even on hacker news (a more sophisticated discussion destination than most) most people who are replying didn't read the body of the message and just saw "are there banks/crypto cos immune to bank run" and just blurted out their usual response "no central bank to bail anyone out" or "banks earn money by investing / crypto has no FDIC". OP is explicitly asking what if banks (tradfi) or crypto cos held…
"It pains me that even on hacker news (a more sophisticated discussion destination than most)"
Sophisticated is a weird way to spell pompous.
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#16I think the term for this is "full-reserve banking" or "100% reserve banking".
The Wikipedia page only talks about governments that have occasionally flirted with the idea, and economists who have debated its merits as a regulatory policy. I haven't found any bank that claims to be doing it.
https://en.wikipedia.org/wiki/Full-reserve_banking
You might be thinking about this the wrong way. It's not that banks are tempted to invest, it's that this is the whole business model, and it's even part of how most governments stimulate (or throttle) economic activity. Ultimately banks get a charter to multiply money, at a rate that the government thinks is good for everyone.
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#17Check out The Narrow Bank and what happened to them.
https://johnhcochrane.blogspot.com/2018/09/fed-nixes-narrow-...
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#18What you're asking about is called narrow banking - as opposed to the broad banking status quo. There are at least two banks, The Narrow Bank and Custodia Bank, that want to bring this business model to customers but the Fed is not interested in authorizing them. Here are some resources:
https://www.spglobal.com/marketintelligence/en/news-insights...
https://www.chicagobooth.edu/review/safest-bank-fed-wont-san...
https://www.listennotes.com/podcasts/bankshot/ep-14-whos-afr...
https://twitter.com/LynAldenContact/status/16379101661369303...
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#19Traditional banks have almost always had "high fee, no yield" account types that you can sign up for where you pay high fees and get a guarantee of high liquidity in exchange. These account types used to be more strongly regulated (to insure this isn't just the bank advertising one thing and doing another) for banks classified as "Credit Unions" but that hasn't been the case in decades. (But for some decades it used to one of the pros specifically for Credit Unions because the high fees doubled as Credit Union dues, in turn limiting membership and overall risk of bank runs.)
Generally, advice is to not use high fee/low yield accounts because you lose money on them (monthly fees means that the more months you store your money in your account the less money you have each month, that's not everyone's preferred "1:1" storage).
Of course, you are still relying on (what little remains of) regulation and the FDIC that a bank takes your high fees and does the right thing with your money and the right prioritization in a run-like environment that they've promised to do.
Re: Ask HN: Are there banks/crypto companies immune to bank run?
#20You can buy government bonds - very little risk involved in terms of price change, and your money is safe from a bank collapse then - that is, even if the bank fails, they just forward all your bonds to a different bank. Also, if you're under the insurance limit, you're safe. If bank insurers fail because too many banks fail, then the currency won't be worth paper it's printed on anyway.
If you hold them to duration government bonds are fine. If you buy them, then interest rates go up, then you need to sell them ... well, SVB did that and now we're here talking about how NOT to do that.
That’s why your buy low duration. Payroll doesn’t just suddenly happen you can plan for these things