Posted by keyhole7 on 11th of Mar 2024 at 09:16 am
The way I understand it, the banks have to have a certain
percentage held in reserves. Example, if you deposit $100 into the
bank, and the bank has to keep a 10% reserve, then they can take
$90 of your money and loan it out. This works, as long as everyone
who has deposited money in the bank, do not come on the same day to
withdraw their money. The Fed came out last year and told banks
they could loan 100% of the money. No reserve needed. As of today,
March 11, Basel III raises the reserve from 0% to 20%. If you're a
Billion-dollar bank, now you have to come up with $200 million
dollars in reserve. If you can't then you could get bought out by
another bank. This is what happened to New York Community bank. New
Your Community bank bought Signature Bank who was in FDIC
receivership and failed when Silicon Valley Bank went down.
From Investopedia: Basel III likewise introduced new leverage
and liquidity requirements aimed at safeguarding against excessive
and risky lending, while ensuring that banks have sufficient
liquidity during periods of financial stress.
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The way I understand it,
Hope everyone is having a good weekend. I just read ...
Posted by keyhole7 on 11th of Mar 2024 at 09:16 am
The way I understand it, the banks have to have a certain percentage held in reserves. Example, if you deposit $100 into the bank, and the bank has to keep a 10% reserve, then they can take $90 of your money and loan it out. This works, as long as everyone who has deposited money in the bank, do not come on the same day to withdraw their money. The Fed came out last year and told banks they could loan 100% of the money. No reserve needed. As of today, March 11, Basel III raises the reserve from 0% to 20%. If you're a Billion-dollar bank, now you have to come up with $200 million dollars in reserve. If you can't then you could get bought out by another bank. This is what happened to New York Community bank. New Your Community bank bought Signature Bank who was in FDIC receivership and failed when Silicon Valley Bank went down.
From Investopedia: Basel III likewise introduced new leverage and liquidity requirements aimed at safeguarding against excessive and risky lending, while ensuring that banks have sufficient liquidity during periods of financial stress.