Sending the cavalry
Mar 13, 2023
That was quick: late Sunday US authorities announced a new backstop for banks that should be big enough to protect all bank deposits. This news came after the closing of New York’s Signature Bank and will fully protect depositor’s money. With this important move, the risk of contagion and more bank runs has been significantly reduced. This is of course a good thing for businesses and consumers who entrusted their cash to the banks. It however also calls for deeper US banking reforms to reduce the risk of modern bank runs provoked by hazardous balance sheet management and moral hazard.