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Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. Th

by kondro 4y ago

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little incentive to stay at one bank over another. If they want equity, they should sell long-term secured loans with LVRs under 100% or lock in my cash with term deposits or any number of other less liquid asset classes. But why should I feel guilt over moving my cash from one bank to another? Maybe it's because I'm Australian but I feel our banking industry is significantly more stable. The last time a bank had any serious issue was 1990 and it was a (single bank that itself was bailed out by the government). Australian banks make their money through mortgages (averaging less than 80% LVR or insurance-backed if higher and with fixed terms of generally no longer than 5 years), credit cards and management fees on long-term investment products -- they don't rely on investing cash deposits on long-term illiquid instruments. The fact this doesn't seem to be the case should raise questions over the entire US banking industry. Cash should be liquid. Edit: For reference, APRA (bank regulator in Australia) has some very strict liquidity risk management requirements and most banks own liquidity requirements are significantly higher than this: https://www.apra.gov.au/apra-explains-liquidity-banking https://www.apra.gov.au/apra-explains-liquidity-banking -- an Australian bank would never be allowed to purchase a 10-30 year bond to match against cash assets.

whateveracct 4y ago
To be pedantic, I'm pretty sure a big enough bank run could topple your banks too. Where do you think they get the cash to lend out from?
- kondro 4y ago
  Australian banks have a mandated 100% LCR and most banks hold 130%+ LCR (remember LCR is calculated based on a 30 day stress outflow). Even if a run lasts longer than the period above they're backed mostly by mortgages that are priced significantly higher than their borrowing costs and LVRs that average lower than 80% and the way AU banks price interest rates will always cost significantly less than their borrowing costs. They're never going to have trouble raising money on prime, variable interest (average fixed terms are always less than 5 years here) debt. APRA standards all but eliminate a sub-prime problem here. Loan affordability has been a very hot topic here over the last decade.
throw123123123 4y ago
That is not what banks do, its the modern banking system. That's what bitcoin was all about..
- Jensson 4y ago
  Bitcoin isn't solvent either, good luck getting your money out in case there is a bank run there.
  - ofchnofc 4y ago
    > Bitcoin isn't solvent So, I'm curious - what do you think this means, when you say it?
    - deleted 4y ago
      [deleted]
- throwawaylinux 4y ago
  That's what banks choose to do. People depositing their money with a bank don't have a responsibility to ensure it remains solvent though. If you think there is a significant risk your bank is going to go under, you get your money out. If you think that risk is due to panic about a bank run kicked off by an unfounded rumor, you get your money out. You take care of your affairs, and the bank can take care of its operations and public relations.
cde-v 4y ago
Ok, I'm starting a new bank and everyone will be able to withdraw all at once, bank runs will be a thing of the past, your interest rate will be 0.00000000000000000000000000000000000000000000000125%
- p1necone 4y ago
  Sounds fine by me. I get better returns investing in index funds anyway, my bank account is literally just somewhere to park my liquid money and direct my paycheck to because stuffing it under my mattress would be too unsafe. Banks should differentiate between accounts where you're safely parking your money, and accounts that are actually low risk investments. And they ideally would offer both of those things. I see no downsides here.
  - rswail 4y ago
    Banks do differentiate. If you have an account that is <$250K, you're covered by the FDIC, which essentially makes it zero risk, irrespective of the account's associated interest payments.
- jabbany 4y ago
  A positive interest rate? That's a no brainer steal. Basically you're saying you'd pay the customer for the privilege of not being able to use their money... A bank that keeps 100% funds as reserve to accommodate any withdrawal pattern not only cannot give any interest, it would need to _charge you_ a maintenance fee to cover the costs of holding your money as well as charge you a per-transaction fee to cover the cost of moving it. And it wouldn't be some symbolic amount like $30/mo. After all, the maintenance fees across all the accounts would need to cover all operating expenses (wages, facilities, utilities, consumables etc.) otherwise the bank would literally lose money to run the transactional account program.
  - starkparker 4y ago
    Sounds like a postal banking system proposal to me. Can you rewrite this in the form of legislation, please?
borski 4y ago
> Australian banks make their money through mortgages Where do you think your banks get the money to loan out for mortgages? I’ll give you a hint: your deposits. This is how banks work.
- Aeolun 4y ago
  Since they can loan out much more than they get in deposits that’s not strictly true right? You can have 10 house loans for every house sized deposit (or something similar).
  - mikeryan 4y ago
    I don't know where that 10x number is from but they can loan more then they take in by taking out lower interest rate loans from central banks. Thats what "The Fed" is. But they're going to use depositor funds first because these days those funds are available at a virtually 0% rate.
  - Danieru 4y ago
    You are confused about how fractional reserve works. The 10x multiplier is on the bank's equity. For every dollar of home loan there is a dollar or more of deposits. The multiplier effect of fraction reserve occurs over iterated loans and depositing. The fraction term comes in because the bank can lend out a fraction, less than 1, of deposits.
    - jrockway 4y ago
      Yup. A bank run is problematic because if you keep 99% of the money but 100% of your customers want cash today, then you're screwed.
      - hnfong 4y ago
        The more modern treatment of this situation is that if you sold the mortgage on the open market as a mortgage backed security you might still be solvent as long as the MBS is valued at least at face value. The real problem with failing banks is that interest rates rose steeply, and thus the MBS devalued by a significant amount.
jrumbut 4y ago
Fixed terms of 5 years would be a very hard change to swallow in the US.
- TylerE 4y ago
  Might fix the Airbnb problem though.
  - jrumbut 4y ago
    Oddly enough, a very similar percentage of homes are owner occupied between the two countries despite the apparently dramatic differences in mortgage availability. Edit: this is based off a two minute Google I could be wrong.
  - kondro 4y ago
    Negative gearing (a way to merge unlimited losses from investment property into your personal tax return) and the core, multi-generational opinion that investment property is the best way to build wealth in Australia and no property tax (equivalent is rates which are significantly lower on average than the US and stamp duty which is only payable on the sale of a property) has causes massive investment in non-PPOR properties as well as massive property inflation costs in general.
mikeryan 4y ago
they don't rely on investing cash deposits on long-term illiquid instruments Where do the banks get the money for the mortgages from those from? Is a central bank giving them loans for to cover the mortgage outlay? Because if they're financing them with customer deposits (which is the way every bank I know in the US works) those mortgages are long-term illiquid instruments.
aristophenes 4y ago
What took down SVB was mortgage securities. In the USA mortgages are typically 30 years long, with a fixed rate the entire time. Actual average duration is only a few years in a declining rate environment and 5-6 years in flat rate environment. In a raising rate environment, which we haven’t really seen for any length of time in most people adult lifetimes, it’s probably 10-15 years. This transition is what harmed SVB and it’s hurt all the banks but most didn’t leverage up so much on them and didn’t have only large, flighty customers. Very unique situation. There are also lots of ways big banks can protect themselves from this duration risk, if they actually care. It sounds like in Australia (and Canada and the UK) the risk has just been shifted from the professionals to the consumers, with only five year mortgages. You can’t pay off your entire house in five years, so many people are dependent on being able to refinance, and are going to be in a lot of hurt over the next few years as the mortgages come due. This does not sound like a better solution.
- kondro 4y ago
  Fixed terms above 5 years are basically non-existent, most people tend to fix a portion (not always 100%) of their loans for 2-3 years if they fix at all. 30 year mortgages here aren't uncommon, but the rates are variable and are basically whatever their bank wants to charge (with competition from other banks preventing them from increasing ridiculously). Loan affordability is a big thing here too with banks being mandated to ensure that borrowers can afford the mortgages they're receiving and even shading interest rates at 3 points above their current levels when assessing this. Sub-prime mortgages are effectively non-existent here as are long-term interest rate risks for banks as their borrowing costs are always pretty closely aligned with their lending revenues.
iab 4y ago
Yes, this is quite naive
djaouen 4y ago
Unfortunately, that’s not how the system currently works. Literally any bank (in our currently capitalist system) would collapse from undue pressure from depositors. This is because banks are under pressure to make a profit, and the only way to do that is through lending out deposits. If you want to fix the system, petition the government to nationalize the banks.
photochemsyn 4y ago
What you're describing is a service provided by a bank called a safe deposit box, which banks provide as a fee service. This is quite an archaic view of banking services. The most basic commercial bank today makes car and home and small business loans using the funds deposited by its clients, and it holds those funds 'for free' (in the 1980s in the USA, one could make 5% interest by depositing one's cash in a bank savings account, with perhaps some penalties for withdrawal, IIRC). The bank charges a greater interest rate to those who take loans from the bank and pays out a lower interest rate to those who deposit funds with the bank, and that difference is where it earns its profit margin. People tell me this little fairy tale has very little to do with the majority of the profits 'earned' in the modern banking system, however. It seems to have something to do with the merger of investment and commercial banking post repeal of Glass-Steagall laws separating those two sectors. Curiously, nobody seems to want to talk about the strength of the dollar being backed up by petrodollar recycling since it went off the gold standard... but hey, who cares, we're fighting a war with Russia in Ukraine over access to the European gas market for just that reason, and the expenditures in Ukraine ($100 billion) seem comparable to the expenditures looming to make good the depositors in SVB and co. ($100 billion?) and these two things must be completely unrelated... I guess.
- deleted 4y ago
  [deleted]
- YeBanKo 4y ago
  Safe deposit boxes are very hard to come by these days. Banks are moving away from them. Last year JPM started phasing them out [1]. The trade is likely to continue. [1] https://www.bloomberg.com/news/articles/2022-09-30/jpmorgan-starts-phasing-out-a-banking-relic-safe-deposit-boxes https://www.bloomberg.com/news/articles/2022-09-30/jpmorgan-...
  - ashwagary 4y ago
    >Safe deposit boxes are very hard to come by these days. Safe deposit boxes are also not insured. If you put $250k of cash in a box and the bank catches on fire or gets robbed, you will most like get $0 back, while people with accounts will atleast get the FDIC insured portion of funds back.
tablespoon 4y ago
> Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Then the product you really want is a safe deposit box to put your literal cash in. They bank will make its money from the rental fee you pay. It doesn't sound like you're actually looking for a bank account that pays interest.
- kondro 4y ago
  Cash is basically illegal for many transactions related to financial services and is likely to become illegal for everything greater than $10k in Australia very soon: https://treasury.gov.au/policy-topics/economy/black-economy/cash-rules-2019 https://treasury.gov.au/policy-topics/economy/black-economy/...
  - sacnoradhq 4y ago
    Australia and India are among those who bought (no pun intended) into the fallacy that cash is for criminals, and you're only a good consumer if you use traceable electronic funds from megacorp SIBs. There are millions, if not billions, of unbanked people whose survival depends on cash. And the US has civil asset forfeiture, were cops call "dibs" on cash and the owner has to essentially disprove a negative they're using it for a legal purpose in order to recover it.
    - jliptzin 4y ago
      This happened to my friend, he was caught with a small amount of marijuana and cocaine in his house while police were there for an unrelated domestic dispute. They then searched the rest of his house and stole approx $10k cash he had in a safe, accusing him of making that money from drug sales (it was really just emergency cash he wanted separate from his bank account, he wasn’t a drug dealer). He never got it back, it was not even in the record of items police seized.
    - 4y ago
fwlr 4y ago
One thing we want from banks is to store our money and provide it to us on demand. Another thing we want from banks is provide lending to the average consumer (mortgages in the large and credit cards in the small). A bank can do both of these well, in most economic situations, if it is run well. Those two services synergize most of the time so it’s useful to combine both under one entity, but in some scenarios the sign can flip and they antagonize each other instead.
NovaDudely 4y ago
I will preface this with - arm chair analysis. I don't know a huge amount about the banking system but I do have one point to make... It is hard to tell is the aussie banks are in any better position. The debt leverage ratio of the big four are incredibly difficult to track down. The last figures I saw are from about 2015 and even then banks like Commonwealth bank were leverage at something like 60:1 however looking at the wikipedia I would put it at something closer to 20:1. If that is true, between 1.7% - 5% of deposits being pulled out would mean they would have to start getting the cash from elsewhere - ie. Sell assets/bonds. That is just based on $72 billion cash to $1.2 Trillion assets. However if this is the case, they have been in this position for a very long time and they seem to be very stable. It feels like there is some big piece of this I am possibly missing. I look forward to others pointing out the weakness of this point of view and correct my grammar in a witty fashion. ;)
- rswail 4y ago
  Australia has the equivalent of FDIC insurance (called FCS) that covers up to AUD250K per account holder at all ADIs. The 4 "major" banks in Australia (Commonwealth, Westpac, NAB, ANZ) all maintain ratios above the minimum requirements and above the international requirements for "unquestionably strong". They're also (implied) "too big to fail". APRA (our banking regulator) publishes plenty of stats. I found this presentation https://www.commbank.com.au/content/dam/commbank-assets/investors/docs/results/fy21/cba-fy21-results-presentation.pdf https://www.commbank.com.au/content/dam/commbank-assets/inve... for the Commonwealth for FY21, which shows that their loan book is funded 73% by deposits, and the remainder is 74% long term, with a 5 year average maturity and they have 13.1% of their capital retained. So if they have they have 13% capital, as well as AUD175B in liquid assets, with $610B in deposits, then they'd start to be in real trouble if more than 25% of their account holders started pulling out cash. Of that $610B, $310B is households, so the split between standard savings accounts and business/investment/term deposits etc is roughly 50/50.
syllablehq 4y ago
Yes, this is naïve, but it's a typical assumption. Cash _should_ be liquid, and almost everyone operates with the assumption that it always _will_ be liquid. but fiat cash is not what people think it is. A dollar in your bank account is not real. It's more like a share in the bank corporation which may or may not be perfectly pegged to the approximate value of the non-elected Fed's manipulated US dollar. Fiat is a theoretical ideal "decreed by the government" which is imposed onto a system with leaky constraints. The system is... super complicated. And super problematic. Macroeconomics is... fuzzy. This is the whole reason why Bitcoin was created in the first place. Bitcoin is fiat created by the masses which has hard constraints. Its economics are a hard science. Bitcoin is as liquid as the system that trades it. Does a Bitcoin have value? Well, universal value, no. But the Bitcoin network has value because it facilitates value transfers (even if you convert to fiat on both sides - look up international remittance fees). And the network is mitigated by the token. So if the system has value, and the token is intrinsic to the network, does a Bitcoin have value? Yeah Bitcoin is complicated, and far from perfect. But when you start to understand how complicated and problematic government fiat is... maybe folks who still think Bitcoin is worthless may want to take another look. We need stronger money networks. #theNetworkIsTheValue.
- hnfong 4y ago
  > It's more like a share in the bank corporation What the heck? No that's just outright wrong. SVB shares are basically worth nothing these days. Depositors are getting something back. If you're not familiar with the relative priority of bailors, secured creditors, depositors, debtors and shareholders during a bankruptcy proceeding, I suggest you read up more before making confident and borderline condescending statements about the common person's naïvety.
jrockway 4y ago
I guess they do this because someone figured out they could. I'm sure once upon a time there was a bank that only took deposits and just stored your cash in a big vault. They went out of business when they realized they had to pay for the vault but couldn't use any of the money in it. This is like showing ads on something you already pay a monthly subscription for. Remember when cable TV was supposed to be ad-free? That died when people realized they could make more money by double-dipping. And everyone was apparently fine with it.
klabb3 4y ago
> If they want equity, they should sell long-term secured loans with LVRs under 100% or lock in my cash with term deposits or any number of other less liquid asset classes. Exactly. Banks get special sweet deal privileges for their “superior” ability to manage risk and they still haven’t come up with a way to protect against a few days of rumors? I don’t buy it. Either it’s extreme incompetence, world record complacency or there’s some meta play where someone makes money off it. And yeah, I’d be super happy to lock in deposits in exchange for a higher interest rate, it’s a dead simple financial product that nobody offers. Failing at running a bank seems to me like losing in tic tac toe as a first mover. This is why people turned to crypto. Not saying it’s good yet, but doing better than the current financial system is a low bar.
- rswail 4y ago
  Isn't a term deposit exactly what you are looking for? Lock in for 3/6/12 months or more and get a higher rate. Aussie banks offer it.
rswail 4y ago
Aussie banks have both fixed and variable rate mortgages. Most mortgages are either: * Fixed: 1-5 year terms with exit fees if changed earlier * Variable: 25 year terms, with variable rates, "offset accounts" (an associated account where you can deposit that offsets the outstanding principal of the mortgage), reduced or zero entry/exit fees, ability to "redraw" (effectively treating the mortgage as a line of credit) etc.

by kondro 4y ago

whateveracct 4y ago

To be pedantic, I'm pretty sure a big enough bank run could topple your banks too. Where do you think they get the cash to lend out from?

kondro 4y ago
Australian banks have a mandated 100% LCR and most banks hold 130%+ LCR (remember LCR is calculated based on a 30 day stress outflow). Even if a run lasts longer than the period above they're backed mostly by mortgages that are priced significantly higher than their borrowing costs and LVRs that average lower than 80% and the way AU banks price interest rates will always cost significantly less than their borrowing costs. They're never going to have trouble raising money on prime, variable interest (average fixed terms are always less than 5 years here) debt. APRA standards all but eliminate a sub-prime problem here. Loan affordability has been a very hot topic here over the last decade.

throw123123123 4y ago

That is not what banks do, its the modern banking system. That's what bitcoin was all about..

Jensson 4y ago
Bitcoin isn't solvent either, good luck getting your money out in case there is a bank run there.
- ofchnofc 4y ago
  > Bitcoin isn't solvent So, I'm curious - what do you think this means, when you say it?
  - deleted 4y ago
    [deleted]
throwawaylinux 4y ago
That's what banks choose to do. People depositing their money with a bank don't have a responsibility to ensure it remains solvent though. If you think there is a significant risk your bank is going to go under, you get your money out. If you think that risk is due to panic about a bank run kicked off by an unfounded rumor, you get your money out. You take care of your affairs, and the bank can take care of its operations and public relations.

cde-v 4y ago

Ok, I'm starting a new bank and everyone will be able to withdraw all at once, bank runs will be a thing of the past, your interest rate will be 0.00000000000000000000000000000000000000000000000125%

p1necone 4y ago
Sounds fine by me. I get better returns investing in index funds anyway, my bank account is literally just somewhere to park my liquid money and direct my paycheck to because stuffing it under my mattress would be too unsafe. Banks should differentiate between accounts where you're safely parking your money, and accounts that are actually low risk investments. And they ideally would offer both of those things. I see no downsides here.
- rswail 4y ago
  Banks do differentiate. If you have an account that is <$250K, you're covered by the FDIC, which essentially makes it zero risk, irrespective of the account's associated interest payments.
jabbany 4y ago
A positive interest rate? That's a no brainer steal. Basically you're saying you'd pay the customer for the privilege of not being able to use their money... A bank that keeps 100% funds as reserve to accommodate any withdrawal pattern not only cannot give any interest, it would need to _charge you_ a maintenance fee to cover the costs of holding your money as well as charge you a per-transaction fee to cover the cost of moving it. And it wouldn't be some symbolic amount like $30/mo. After all, the maintenance fees across all the accounts would need to cover all operating expenses (wages, facilities, utilities, consumables etc.) otherwise the bank would literally lose money to run the transactional account program.
- starkparker 4y ago
  Sounds like a postal banking system proposal to me. Can you rewrite this in the form of legislation, please?

borski 4y ago

> Australian banks make their money through mortgages Where do you think your banks get the money to loan out for mortgages? I’ll give you a hint: your deposits. This is how banks work.

Aeolun 4y ago
Since they can loan out much more than they get in deposits that’s not strictly true right? You can have 10 house loans for every house sized deposit (or something similar).
- mikeryan 4y ago
  I don't know where that 10x number is from but they can loan more then they take in by taking out lower interest rate loans from central banks. Thats what "The Fed" is. But they're going to use depositor funds first because these days those funds are available at a virtually 0% rate.
- Danieru 4y ago
  You are confused about how fractional reserve works. The 10x multiplier is on the bank's equity. For every dollar of home loan there is a dollar or more of deposits. The multiplier effect of fraction reserve occurs over iterated loans and depositing. The fraction term comes in because the bank can lend out a fraction, less than 1, of deposits.
  - jrockway 4y ago
    Yup. A bank run is problematic because if you keep 99% of the money but 100% of your customers want cash today, then you're screwed.
    - hnfong 4y ago
      The more modern treatment of this situation is that if you sold the mortgage on the open market as a mortgage backed security you might still be solvent as long as the MBS is valued at least at face value. The real problem with failing banks is that interest rates rose steeply, and thus the MBS devalued by a significant amount.

jrumbut 4y ago

Fixed terms of 5 years would be a very hard change to swallow in the US.

TylerE 4y ago
Might fix the Airbnb problem though.
- jrumbut 4y ago
  Oddly enough, a very similar percentage of homes are owner occupied between the two countries despite the apparently dramatic differences in mortgage availability. Edit: this is based off a two minute Google I could be wrong.
- kondro 4y ago
  Negative gearing (a way to merge unlimited losses from investment property into your personal tax return) and the core, multi-generational opinion that investment property is the best way to build wealth in Australia and no property tax (equivalent is rates which are significantly lower on average than the US and stamp duty which is only payable on the sale of a property) has causes massive investment in non-PPOR properties as well as massive property inflation costs in general.

mikeryan 4y ago

they don't rely on investing cash deposits on long-term illiquid instruments Where do the banks get the money for the mortgages from those from? Is a central bank giving them loans for to cover the mortgage outlay? Because if they're financing them with customer deposits (which is the way every bank I know in the US works) those mortgages are long-term illiquid instruments.

aristophenes 4y ago

What took down SVB was mortgage securities. In the USA mortgages are typically 30 years long, with a fixed rate the entire time. Actual average duration is only a few years in a declining rate environment and 5-6 years in flat rate environment. In a raising rate environment, which we haven’t really seen for any length of time in most people adult lifetimes, it’s probably 10-15 years. This transition is what harmed SVB and it’s hurt all the banks but most didn’t leverage up so much on them and didn’t have only large, flighty customers. Very unique situation. There are also lots of ways big banks can protect themselves from this duration risk, if they actually care. It sounds like in Australia (and Canada and the UK) the risk has just been shifted from the professionals to the consumers, with only five year mortgages. You can’t pay off your entire house in five years, so many people are dependent on being able to refinance, and are going to be in a lot of hurt over the next few years as the mortgages come due. This does not sound like a better solution.

kondro 4y ago
Fixed terms above 5 years are basically non-existent, most people tend to fix a portion (not always 100%) of their loans for 2-3 years if they fix at all. 30 year mortgages here aren't uncommon, but the rates are variable and are basically whatever their bank wants to charge (with competition from other banks preventing them from increasing ridiculously). Loan affordability is a big thing here too with banks being mandated to ensure that borrowers can afford the mortgages they're receiving and even shading interest rates at 3 points above their current levels when assessing this. Sub-prime mortgages are effectively non-existent here as are long-term interest rate risks for banks as their borrowing costs are always pretty closely aligned with their lending revenues.

iab 4y ago

Yes, this is quite naive

djaouen 4y ago

Unfortunately, that’s not how the system currently works. Literally any bank (in our currently capitalist system) would collapse from undue pressure from depositors. This is because banks are under pressure to make a profit, and the only way to do that is through lending out deposits. If you want to fix the system, petition the government to nationalize the banks.

photochemsyn 4y ago

What you're describing is a service provided by a bank called a safe deposit box, which banks provide as a fee service. This is quite an archaic view of banking services. The most basic commercial bank today makes car and home and small business loans using the funds deposited by its clients, and it holds those funds 'for free' (in the 1980s in the USA, one could make 5% interest by depositing one's cash in a bank savings account, with perhaps some penalties for withdrawal, IIRC). The bank charges a greater interest rate to those who take loans from the bank and pays out a lower interest rate to those who deposit funds with the bank, and that difference is where it earns its profit margin. People tell me this little fairy tale has very little to do with the majority of the profits 'earned' in the modern banking system, however. It seems to have something to do with the merger of investment and commercial banking post repeal of Glass-Steagall laws separating those two sectors. Curiously, nobody seems to want to talk about the strength of the dollar being backed up by petrodollar recycling since it went off the gold standard... but hey, who cares, we're fighting a war with Russia in Ukraine over access to the European gas market for just that reason, and the expenditures in Ukraine ($100 billion) seem comparable to the expenditures looming to make good the depositors in SVB and co. ($100 billion?) and these two things must be completely unrelated... I guess.

deleted 4y ago
[deleted]
YeBanKo 4y ago
Safe deposit boxes are very hard to come by these days. Banks are moving away from them. Last year JPM started phasing them out [1]. The trade is likely to continue. [1] https://www.bloomberg.com/news/articles/2022-09-30/jpmorgan-starts-phasing-out-a-banking-relic-safe-deposit-boxes https://www.bloomberg.com/news/articles/2022-09-30/jpmorgan-...
- ashwagary 4y ago
  >Safe deposit boxes are very hard to come by these days. Safe deposit boxes are also not insured. If you put $250k of cash in a box and the bank catches on fire or gets robbed, you will most like get $0 back, while people with accounts will atleast get the FDIC insured portion of funds back.

tablespoon 4y ago

> Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Then the product you really want is a safe deposit box to put your literal cash in. They bank will make its money from the rental fee you pay. It doesn't sound like you're actually looking for a bank account that pays interest.

kondro 4y ago
Cash is basically illegal for many transactions related to financial services and is likely to become illegal for everything greater than $10k in Australia very soon: https://treasury.gov.au/policy-topics/economy/black-economy/cash-rules-2019 https://treasury.gov.au/policy-topics/economy/black-economy/...
- sacnoradhq 4y ago
  Australia and India are among those who bought (no pun intended) into the fallacy that cash is for criminals, and you're only a good consumer if you use traceable electronic funds from megacorp SIBs. There are millions, if not billions, of unbanked people whose survival depends on cash. And the US has civil asset forfeiture, were cops call "dibs" on cash and the owner has to essentially disprove a negative they're using it for a legal purpose in order to recover it.
  - jliptzin 4y ago
    This happened to my friend, he was caught with a small amount of marijuana and cocaine in his house while police were there for an unrelated domestic dispute. They then searched the rest of his house and stole approx $10k cash he had in a safe, accusing him of making that money from drug sales (it was really just emergency cash he wanted separate from his bank account, he wasn’t a drug dealer). He never got it back, it was not even in the record of items police seized.
  - 4y ago

fwlr 4y ago

One thing we want from banks is to store our money and provide it to us on demand. Another thing we want from banks is provide lending to the average consumer (mortgages in the large and credit cards in the small). A bank can do both of these well, in most economic situations, if it is run well. Those two services synergize most of the time so it’s useful to combine both under one entity, but in some scenarios the sign can flip and they antagonize each other instead.

NovaDudely 4y ago

I will preface this with - arm chair analysis. I don't know a huge amount about the banking system but I do have one point to make... It is hard to tell is the aussie banks are in any better position. The debt leverage ratio of the big four are incredibly difficult to track down. The last figures I saw are from about 2015 and even then banks like Commonwealth bank were leverage at something like 60:1 however looking at the wikipedia I would put it at something closer to 20:1. If that is true, between 1.7% - 5% of deposits being pulled out would mean they would have to start getting the cash from elsewhere - ie. Sell assets/bonds. That is just based on $72 billion cash to $1.2 Trillion assets. However if this is the case, they have been in this position for a very long time and they seem to be very stable. It feels like there is some big piece of this I am possibly missing. I look forward to others pointing out the weakness of this point of view and correct my grammar in a witty fashion. ;)

rswail 4y ago
Australia has the equivalent of FDIC insurance (called FCS) that covers up to AUD250K per account holder at all ADIs. The 4 "major" banks in Australia (Commonwealth, Westpac, NAB, ANZ) all maintain ratios above the minimum requirements and above the international requirements for "unquestionably strong". They're also (implied) "too big to fail". APRA (our banking regulator) publishes plenty of stats. I found this presentation https://www.commbank.com.au/content/dam/commbank-assets/investors/docs/results/fy21/cba-fy21-results-presentation.pdf https://www.commbank.com.au/content/dam/commbank-assets/inve... for the Commonwealth for FY21, which shows that their loan book is funded 73% by deposits, and the remainder is 74% long term, with a 5 year average maturity and they have 13.1% of their capital retained. So if they have they have 13% capital, as well as AUD175B in liquid assets, with $610B in deposits, then they'd start to be in real trouble if more than 25% of their account holders started pulling out cash. Of that $610B, $310B is households, so the split between standard savings accounts and business/investment/term deposits etc is roughly 50/50.

syllablehq 4y ago

Yes, this is naïve, but it's a typical assumption. Cash _should_ be liquid, and almost everyone operates with the assumption that it always _will_ be liquid. but fiat cash is not what people think it is. A dollar in your bank account is not real. It's more like a share in the bank corporation which may or may not be perfectly pegged to the approximate value of the non-elected Fed's manipulated US dollar. Fiat is a theoretical ideal "decreed by the government" which is imposed onto a system with leaky constraints. The system is... super complicated. And super problematic. Macroeconomics is... fuzzy. This is the whole reason why Bitcoin was created in the first place. Bitcoin is fiat created by the masses which has hard constraints. Its economics are a hard science. Bitcoin is as liquid as the system that trades it. Does a Bitcoin have value? Well, universal value, no. But the Bitcoin network has value because it facilitates value transfers (even if you convert to fiat on both sides - look up international remittance fees). And the network is mitigated by the token. So if the system has value, and the token is intrinsic to the network, does a Bitcoin have value? Yeah Bitcoin is complicated, and far from perfect. But when you start to understand how complicated and problematic government fiat is... maybe folks who still think Bitcoin is worthless may want to take another look. We need stronger money networks. #theNetworkIsTheValue.

hnfong 4y ago
> It's more like a share in the bank corporation What the heck? No that's just outright wrong. SVB shares are basically worth nothing these days. Depositors are getting something back. If you're not familiar with the relative priority of bailors, secured creditors, depositors, debtors and shareholders during a bankruptcy proceeding, I suggest you read up more before making confident and borderline condescending statements about the common person's naïvety.

jrockway 4y ago

I guess they do this because someone figured out they could. I'm sure once upon a time there was a bank that only took deposits and just stored your cash in a big vault. They went out of business when they realized they had to pay for the vault but couldn't use any of the money in it. This is like showing ads on something you already pay a monthly subscription for. Remember when cable TV was supposed to be ad-free? That died when people realized they could make more money by double-dipping. And everyone was apparently fine with it.

klabb3 4y ago

> If they want equity, they should sell long-term secured loans with LVRs under 100% or lock in my cash with term deposits or any number of other less liquid asset classes. Exactly. Banks get special sweet deal privileges for their “superior” ability to manage risk and they still haven’t come up with a way to protect against a few days of rumors? I don’t buy it. Either it’s extreme incompetence, world record complacency or there’s some meta play where someone makes money off it. And yeah, I’d be super happy to lock in deposits in exchange for a higher interest rate, it’s a dead simple financial product that nobody offers. Failing at running a bank seems to me like losing in tic tac toe as a first mover. This is why people turned to crypto. Not saying it’s good yet, but doing better than the current financial system is a low bar.

rswail 4y ago
Isn't a term deposit exactly what you are looking for? Lock in for 3/6/12 months or more and get a higher rate. Aussie banks offer it.

rswail 4y ago

Aussie banks have both fixed and variable rate mortgages. Most mortgages are either: * Fixed: 1-5 year terms with exit fees if changed earlier * Variable: 25 year terms, with variable rates, "offset accounts" (an associated account where you can deposit that offsets the outstanding principal of the mortgage), reduced or zero entry/exit fees, ability to "redraw" (effectively treating the mortgage as a line of credit) etc.