3 ms·

so it looks like the bank run was not the root cause but a consequence of this mess, and all these people moralizing about not panicking were essentially advisi

so it looks like the bank run was not the root cause but a consequence of this mess, and all these people moralizing about not panicking were essentially advising small companies to keep funding wild practices of one adventurous bank CEO out of their pocket - how could it have ended in anything else?

cm2187 4y ago
Yes and no. LCR is basically requiring you to keep in cash and liquid assets the equivalent of a 30 day bank run. And it should work. A european bank had very large bank run last year and survived without even breaching its regulatory minimums. But that still leaves the bank in a weak position after the bank run, and you can't predict the exact magnitude of a run.
- aqme28 4y ago
  What is a "30 day" bank run? How is a bank run measured in time?
  - Our_Benefactors 4y ago
    Undoubtedly it is a dry bureaucratic definition like “A 30 day period where on each day capital outflows were greater than inflows by a factor of 10”, of course in the definition failing to capture what an _actual_ bank run is.
  - andreareina 4y ago
    Seems to just mean 30 days of average outflows, i.e. a bank should be ok for that long without any money coming in via new deposits, loan repayments, etc. Of course the issue is when you have larger-than-average withdrawals... https://www.investopedia.com/terms/l/liquidity-coverage-ratio.asp https://www.investopedia.com/terms/l/liquidity-coverage-rati...
    - Scoundreller 4y ago
      Probably doesn’t help that this is very a niche bank. Lots of orgs running their payroll from this bank, but few retail account holders. At a typical community/regional bank, payday is just a bunch of bill entries: debit the corp account and credit the employees accounts. Meanwhile a business-focussed bank will just have huge debits every Friday without corresponding credits: those are happening at other banks. And with a small number of account holders, it doesn’t take many actors to cause an a bank run. Payday sealed the fate here.
  - cm2187 4y ago
    All institutional investors take their money back as soon as they are legally allowed, no new financing available, and for other clients, assumptions are made, calibrated by the regulator on previous bank runs. And you net that with the bank getting its money back as soon as available (with a limit on the netting between inflows and outflows at 75% of outflows).

cm2187 4y ago

Yes and no. LCR is basically requiring you to keep in cash and liquid assets the equivalent of a 30 day bank run. And it should work. A european bank had very large bank run last year and survived without even breaching its regulatory minimums. But that still leaves the bank in a weak position after the bank run, and you can't predict the exact magnitude of a run.

aqme28 4y ago
What is a "30 day" bank run? How is a bank run measured in time?
- Our_Benefactors 4y ago
  Undoubtedly it is a dry bureaucratic definition like “A 30 day period where on each day capital outflows were greater than inflows by a factor of 10”, of course in the definition failing to capture what an _actual_ bank run is.
- andreareina 4y ago
  Seems to just mean 30 days of average outflows, i.e. a bank should be ok for that long without any money coming in via new deposits, loan repayments, etc. Of course the issue is when you have larger-than-average withdrawals... https://www.investopedia.com/terms/l/liquidity-coverage-ratio.asp https://www.investopedia.com/terms/l/liquidity-coverage-rati...
  - Scoundreller 4y ago
    Probably doesn’t help that this is very a niche bank. Lots of orgs running their payroll from this bank, but few retail account holders. At a typical community/regional bank, payday is just a bunch of bill entries: debit the corp account and credit the employees accounts. Meanwhile a business-focussed bank will just have huge debits every Friday without corresponding credits: those are happening at other banks. And with a small number of account holders, it doesn’t take many actors to cause an a bank run. Payday sealed the fate here.
- cm2187 4y ago
  All institutional investors take their money back as soon as they are legally allowed, no new financing available, and for other clients, assumptions are made, calibrated by the regulator on previous bank runs. And you net that with the bank getting its money back as soon as available (with a limit on the netting between inflows and outflows at 75% of outflows).