> That’s the thing though, they could lend out and pay interest on “savings” with the understanding that the money might not be immediately available for withdr

> That’s the thing though, they could lend out and pay interest on “savings” with the understanding that the money might not be immediately available for withdrawal as it’s “in the wild”. Those are Certificates of Deposit. > they didn’t seem to get in trouble due to fractional reserve lending but from the liquidity of their assets. It was the opposite. SVB had over-invested in long-term US treasuries, which are extremely liquid, but were falling in price due to the rapid increase of interest rates. If not for withdrawals squeezing their reserve, SVB could hold onto those treasuries until maturity and get back 100% of their principle. --- I think the disconnect is that savings accounts are not popularly well understood. People are shocked when they understand that the money they deposited is not sitting in a big vault. You could tweak fractional reserves to be 20% (or 80%) of deposits, but that comes at a cost too. For example, it would create scarcity of money available for lending, which in turn would make loans more expensive (e.g., higher interest rate mortgages could double the cost of home ownership.) The current system prevents the worst of bank runs by covering a good chunk of assets with insurance (FDIC in the US). It's a system that allows banks to fail and protect customer deposits. The collapse of SVB was not a "catastrophe" because the banking system is intended to let banks fail. The alternative is far worse.