If Credit Suisse can suffer a run the same thing can happen to any other bank, anywhere, at any time

 What happened to Silicon Valley Bank — the most symbolic of this round of US bank failures — is well understood. It is a tale as old as banking. 

Borrow short, lend long, see you in hell. The only wonder is how sophisticated people let it happen. Silvergate, Signature and First Republic are variations on the theme, with added crypto.

Silicon Valley Bank did dumb stuff and its depositors were at risk. But if Credit Suisse can suffer a run even though it was liquid and well capitalised, then the same thing can happen to any other bank, anywhere, at any time.

Perhaps ultra-rich clients moving cash on their mobile phones helped to kill Credit Suisse, but this cannot be the whole story.

Ultimately, the question Credit Suisse raises is whether any amount of capital and liquidity can make a risk-taking bank safe, boosting the case for narrow banking or wider access to central bank money. 

The momentum of innovation is already in that direction and it truly would be a horror story for commercial banks. 

Robin Harding FT 30 May 2023


The Only Way to Stop Bank Runs Is to Get Rid of Banks



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