3 ms·
Most if not all banks would have trouble paying out if there was a run. It is called fractional reserve banking.
by MrDresden 4y ago
Most if not all banks would have trouble paying out if there was a run. It is called fractional reserve banking.
- dx034 4y agoIn the end they're not, because if there isn't outright fraud, some other bank will just buy them. If Silicon Valley bank is in trouble, I'm sure one of the bigger ones would want to buy them. Their customer base is worth something and they'd get it for next to nothing. And for JP Morgan or Citi, a run on Silicon Valley bank hardly touches their cash reserves..
- stephen_g 4y agoNot exactly - ‘fractional reserve banking’ only happens in textbooks, it doesn’t actually describe how real banks work. But it is true that basically no bank could immediately pay out all their deposits without running into liquidity issues.