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For money storage that existed in some large countries up until the end of the GFC (e.g., German Bundesbank offered some deposits to retail). I don't think that

For money storage that existed in some large countries up until the end of the GFC (e.g., German Bundesbank offered some deposits to retail). I don't think that would need much retooling rather than a change in risks for banks to manage. Edit: I think technically the deposits where with the federal finance agency, i.e., lending to the federal republic. Don't think that matters for the discussion here.

JumpCrisscross 3y ago
> don't think that would need much retooling rather than a change in risks for banks to manage In a crisis, it would make the narrow/public bank the natural place to drain deposits. (Similar to our SIFIs today.) As such, narrow banking would mean the end of commercial checking. That means we need to find non-bank providers of all the asset-side services, from lending to trade finance, banks currently provide. That's the re-tooling.
- RandomLensman 3y ago
  It didn't work like that in 2007/8 in Germany. Deposits didn't just all go to the Bundesbank/Finanzagentur. Maybe you need different banks in the mix, e.g., more coops. For lending, some alternatives exist already, same for trade finance. I think the delta to the current state would be surprisingly small.
  - JumpCrisscross 3y ago
    > didn't work like that in 2007/8 in Germany Do you have a source on the scope of what they did? > some alternatives exist already, same for trade finance. I think the delta to the current state would be surprisingly small The delta is tens of trillions of dollars. By no means insurmountable. But you don't want that changeover happening unexpectedly in a crisis.
    - RandomLensman 3y ago
      Not saying should be done right now, but I would consider not having a discussion about it an error. German Bundesbank has a timeseries database you can drill into for banks' balance sheet and other data (easy to find).
      - JumpCrisscross 3y ago
        I meant on the Bundesbank providing checking accounts. Source on that, why it was ended, et cetera.
        RandomLensman 3y ago
        I didn't say checking accounts, but money storage with the respective sovereign (and daily liquidity). Was actually the German finance agency (same thing for our purposes really, as only daily risk is sovereign Germany). There were claims that lobbying by banks killed it, but it was also not very attractive in a low yield environment. Ostensibly, it was created to broaden the funding base of the Federal Republic, I think. This was the thing: https://www.deutsche-finanzagentur.de/bundeswertpapiere/bundeswertpapierarten/sonstige-finanzierungsinstrumente/tagesanleihe https://www.deutsche-finanzagentur.de/bundeswertpapiere/bund...
        JumpCrisscross 3y ago
        We once had postal banking in America [1]. I could see a bridge to narrow banking working if it’s restricted to natural person depositors and prohibited from paying interest or something. (And by extension, their reserves wouldn’t earn as much as their risk-taking peers.) > money storage with the respective sovereign (and daily liquidity) You can buy overnight bills in most countries. [1] https://www.investopedia.com/what-is-postal-banking-5217341 https://www.investopedia.com/what-is-postal-banking-5217341

JumpCrisscross 3y ago

> don't think that would need much retooling rather than a change in risks for banks to manage In a crisis, it would make the narrow/public bank the natural place to drain deposits. (Similar to our SIFIs today.) As such, narrow banking would mean the end of commercial checking. That means we need to find non-bank providers of all the asset-side services, from lending to trade finance, banks currently provide. That's the re-tooling.

RandomLensman 3y ago
It didn't work like that in 2007/8 in Germany. Deposits didn't just all go to the Bundesbank/Finanzagentur. Maybe you need different banks in the mix, e.g., more coops. For lending, some alternatives exist already, same for trade finance. I think the delta to the current state would be surprisingly small.
- JumpCrisscross 3y ago
  > didn't work like that in 2007/8 in Germany Do you have a source on the scope of what they did? > some alternatives exist already, same for trade finance. I think the delta to the current state would be surprisingly small The delta is tens of trillions of dollars. By no means insurmountable. But you don't want that changeover happening unexpectedly in a crisis.
  - RandomLensman 3y ago
    Not saying should be done right now, but I would consider not having a discussion about it an error. German Bundesbank has a timeseries database you can drill into for banks' balance sheet and other data (easy to find).
    - JumpCrisscross 3y ago
      I meant on the Bundesbank providing checking accounts. Source on that, why it was ended, et cetera.
      - RandomLensman 3y ago
        I didn't say checking accounts, but money storage with the respective sovereign (and daily liquidity). Was actually the German finance agency (same thing for our purposes really, as only daily risk is sovereign Germany). There were claims that lobbying by banks killed it, but it was also not very attractive in a low yield environment. Ostensibly, it was created to broaden the funding base of the Federal Republic, I think. This was the thing: https://www.deutsche-finanzagentur.de/bundeswertpapiere/bundeswertpapierarten/sonstige-finanzierungsinstrumente/tagesanleihe https://www.deutsche-finanzagentur.de/bundeswertpapiere/bund...
        JumpCrisscross 3y ago
        We once had postal banking in America [1]. I could see a bridge to narrow banking working if it’s restricted to natural person depositors and prohibited from paying interest or something. (And by extension, their reserves wouldn’t earn as much as their risk-taking peers.) > money storage with the respective sovereign (and daily liquidity) You can buy overnight bills in most countries. [1] https://www.investopedia.com/what-is-postal-banking-5217341 https://www.investopedia.com/what-is-postal-banking-5217341