5 ms·

> Because running a bank isn't easy (...) For example, you have to maintain a fraction of your total deposits in a cash account. What is hard keeping a fractio

• duqd_ 8y ago
  Paying people to understand exactly what form that regulatory capital should take. Determining where it should be held. Proving to your regulators that you or someone you retain followed the proper procedure in determining how much and what kind of capital should be held. Demonstrating that the proper changes to those balances were made at the proper times and that an internal framework exists for making modifications as risk exposures shift. (And more and more and more.) Here's the simplest summary I could find of one of the many required compliance frameworks: https://www.bis.org/bcbs/basel3/b3_bank_sup_reforms.pdf https://www.bis.org/bcbs/basel3/b3_bank_sup_reforms.pdf
• clairity 8y ago
  the problem is not in keeping the cash stashed away, but in the opportunity cost of doing so. startups are first and foremost expected to grow quickly and setting money aside dampens their growth rate (along with the hefty regulatory requirements of running a bank). if banking is needed, most startups will partner with a bank instead, so it has access to all of its cash, even if it has to pay a bit more to do so. flexibility has value (which is the same reason options have value beyond the underlying asset).
  • harryh 8y ago
    "maintain a fraction of your total deposits in a cash account" != setting operating capital aside. Those are two different piles of money.