3 ms·

BoA is a GSIB, meaning it’s deposits are essentially explicitly guaranteed as it’s not allowed to fail due to its systemic importance to a functional financial

BoA is a GSIB, meaning it’s deposits are essentially explicitly guaranteed as it’s not allowed to fail due to its systemic importance to a functional financial system.

jarym 3y ago
That’s a small but dangerous jump. Deposits will be protected as much as possible but that doesn’t mean in a worst case event there can’t be a bail-in. Happened to Cypriot banks. Just because it’s a GSIB doesn’t guarantee that the US tax payer would pick up the tab on all deposits if push came to shove.
- rich_sasha 3y ago
  I believe FDIC guarantees private deposits up to $250k. And FDIC itself is guaranteed by the US government so it's basically backed by a dollar printing machine. Excluding deposits over 250k and non-personal deposits but I believe these are a minority for a bank like BoA, which is mostly retail.
  - dmoy 3y ago
    I don't know about post pandemic, but pre pandemic >50% of BoA deposits were uninsured. Anyways this is kind of a nonsequitur because GSIB goes quite a bit beyond just FDIC coverage.
    - keep_reading 3y ago
      GSIB is just a list made after analyzing the global markets in the wake of the 2008 crisis and those on the list have some additional reporting requirements, nothing more nothing less.
      - dmoy 3y ago
        and additional reserve requirements, and the implicit backing of governments due to their status as "too big to fail" It may not be written down explicitly in the definition of gsib, but it definitely goes beyond just fdic
- Yeul 3y ago
  I think we can all agree there's a tiny difference between Cyprus and America. Besides in Cyprus case the reliable Northern Europeans managed to keep the financial system stable. To paraphrase Kissinger: "if Europe has a financial crisis who do I call?". The answer is Berlin.
- notfromhere 3y ago
  We just watched SVB get bailed out, can't imagine BoA would be allowed to go under.
keep_reading 3y ago
> explicitly guaranteed You mean implicitly, because there is no explicit guarantee ANYWHERE saying so. > it’s not allowed to fail due to its systemic importance Agency MBS. Fed has no mandate to keep buying and they're not. BoA can definitely fail. It would be disastrous to NOT let it fail.
paulddraper 3y ago
Well, a lot greater % of deposits are FDIC guaranteed

BoA is a GSIB, meaning it’s deposits are essentially explicitly guaranteed as it’s not allowed to fail due to its systemic importance to a functional financial system.

jarym 3y ago

That’s a small but dangerous jump. Deposits will be protected as much as possible but that doesn’t mean in a worst case event there can’t be a bail-in. Happened to Cypriot banks. Just because it’s a GSIB doesn’t guarantee that the US tax payer would pick up the tab on all deposits if push came to shove.

rich_sasha 3y ago
I believe FDIC guarantees private deposits up to $250k. And FDIC itself is guaranteed by the US government so it's basically backed by a dollar printing machine. Excluding deposits over 250k and non-personal deposits but I believe these are a minority for a bank like BoA, which is mostly retail.
- dmoy 3y ago
  I don't know about post pandemic, but pre pandemic >50% of BoA deposits were uninsured. Anyways this is kind of a nonsequitur because GSIB goes quite a bit beyond just FDIC coverage.
  - keep_reading 3y ago
    GSIB is just a list made after analyzing the global markets in the wake of the 2008 crisis and those on the list have some additional reporting requirements, nothing more nothing less.
    - dmoy 3y ago
      and additional reserve requirements, and the implicit backing of governments due to their status as "too big to fail" It may not be written down explicitly in the definition of gsib, but it definitely goes beyond just fdic
Yeul 3y ago
I think we can all agree there's a tiny difference between Cyprus and America. Besides in Cyprus case the reliable Northern Europeans managed to keep the financial system stable. To paraphrase Kissinger: "if Europe has a financial crisis who do I call?". The answer is Berlin.
notfromhere 3y ago
We just watched SVB get bailed out, can't imagine BoA would be allowed to go under.

keep_reading 3y ago

> explicitly guaranteed You mean implicitly, because there is no explicit guarantee ANYWHERE saying so. > it’s not allowed to fail due to its systemic importance Agency MBS. Fed has no mandate to keep buying and they're not. BoA can definitely fail. It would be disastrous to NOT let it fail.

paulddraper 3y ago

Well, a lot greater % of deposits are FDIC guaranteed