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> There is absolutely no hedge that can stop a bank run In this case there were a significant number of hedges available to prevent a bank run. 1. Diversify D
by smileysteve 3y ago
> There is absolutely no hedge that can stop a bank run
In this case there were a significant number of hedges available to prevent a bank run.
1. Diversify Depositors (Sequoia's terms to keep balances at SVB is a risk to the bank, you hedge this by marketing to mom and pops);
2. Offer high rate CDs until your long term depositors are > X% of deposits. Yes this results in negative marginal returns until the bank rebalances its investments.
3. Private insurance (charged as fees to depositors) to accounts over FDIC limit (encourages #1 and #2)
4. Shorter term financial instruments