Are there banks/crypto companies immune to bank run?
With SVB and other banks having issues now, with crypto companies with stable coins (UST for example) collapsing, I’m wondering why there is no bank/crypto company that just holds your money 1:1, so even there is a bank run they can return all the money. You need some revenue to operate a company, but you can do it by charging customers a monthly fee and keep money as is without investing it anywhere and do not provide deposit/loans services, just storing your money and providing money transfer services (wire, checks, debit cards). Is it just eventually any company would love to earn more, so they invest it in some assets thus increasing the risk or something else?
Traditional banks have almost always had "high fee, no yield" account types that you can sign up for where you pay high fees and get a guarantee of high liquidity in exchange. These account types used to be more strongly regulated (to insure this isn't just the bank advertising one thing and doing another) for banks classified as "Credit Unions" but that hasn't been the case in decades. (But for some decades it used to one of the pros specifically for Credit Unions because the high fees doubled as Credit Union dues, in turn limiting membership and overall risk of bank runs.)
Generally, advice is to not use high fee/low yield accounts because you lose money on them (monthly fees means that the more months you store your money in your account the less money you have each month, that's not everyone's preferred "1:1" storage).
Of course, you are still relying on (what little remains of) regulation and the FDIC that a bank takes your high fees and does the right thing with your money and the right prioritization in a run-like environment that they've promised to do.
No, they are more prone to runs because there is no central bank to bail anyone out
You can buy government bonds - very little risk involved in terms of price change, and your money is safe from a bank collapse then - that is, even if the bank fails, they just forward all your bonds to a different bank.
Also, if you're under the insurance limit, you're safe. If bank insurers fail because too many banks fail, then the currency won't be worth paper it's printed on anyway.
It pains me that even on hacker news (a more sophisticated discussion destination than most) most people who are replying didn't read the body of the message and just saw "are there banks/crypto cos immune to bank run" and just blurted out their usual response "no central bank to bail anyone out" or "banks earn money by investing / crypto has no FDIC".
OP is explicitly asking what if banks (tradfi) or crypto cos held assets 1:1 and charged fees as operations rather than invest funds. The question isn't so much around tradfi vs crypto but inclusive of both, that can a bank business sustain this way or not.
I don't have answers but I have a feeling a bank/crypto bank like this would attract far fewer regular customers to be able to sustain running it, like a couple of replies said.
I think the term for this is "full-reserve banking" or "100% reserve banking".
The Wikipedia page only talks about governments that have occasionally flirted with the idea, and economists who have debated its merits as a regulatory policy. I haven't found any bank that claims to be doing it.
https://en.wikipedia.org/wiki/Full-reserve_banking
You might be thinking about this the wrong way. It's not that banks are tempted to invest, it's that this is the whole business model, and it's even part of how most governments stimulate (or throttle) economic activity. Ultimately banks get a charter to multiply money, at a rate that the government thinks is good for everyone.
You don't need a bank for this. What you describe is a broker. You can open an account with InteractiveBrokers and buy government bonds. You buy the maturity that fits your cash flow. Problem solved.
Imagine if there was one. In the scenario where there was a bank run on anybody, this hypothetical bank would be more reliable than the government itself and would end up storing all the money available and bankrupts literally everybody else.
Such an outcome is undesirable, so this type of bank isn't allowed.
If you meant a bank that is guarenteed to recover money up to a certain amount, standard FDIC protections have you covered.
Banks earn money by investing and making loans.
As a result, they don't have enough readily available cash to fully reimburse every depositor. This is called "fractional reserve" banking.
The backstop in the USA in case of a bank run is FDIC insurance --- as applied in the case of SVB.
The FDIC also applies rules and regulations to member banks designed to limit and mitigate the reasonably possible effects of a bank run.
Crypto has none of this.
You may be interested in the SPOT cryptocurrency, it's design claims to be 'an inflation-resistant store of value that features responsible protocol design choices. It is a freely redeemable, on-chain, stable asset that can safely wind down to zero users under stress without interventional bailouts'
spot.cash
Bank runs are rare while monthly subscriptions show up in your balance sheet every month. People prefer to take a minor risk instead of constantly losing money. If they don't trust the banks, they would just keep their savings under the floorboards or in assets like houses or gold.
Most people are well under the insurance limit and would rather bank for free than pay fees.
I just started this account and this was the first topic I read. I like the idea implied. This is basically what you're paying a investment banker to do. I'm a business major and my gf is a investment banker. My question is would you use this service if I provided it? Currently it would be an impossible feat to get such a thing Fdic insured but I believe believe cryptocurrency is the future currency of the world's and since the Fdx scandal has bounced back nicely and is on a steady rise
BTC has been pumping hard since SVB, just sayin'