Asset and Liability Management Talk

FHNW’s School of Business offers monthly “Asset and Liability Management Talks” to the global ALM community aiming to provide current insights on relevant ALM topics either in a fully online or hybrid mode.

Rapid and large deposit outflows from banks, their financial stability implications and possible regulatory and policy responses have regained attention in the context of the March 2023 demises of Credit Suisse, SVB and other regional US banks. Moreover, the possible introduction of CBDC or a marked success of stablecoins are perceived as additional clouds over the future of bank funding via (stable) deposits. While the bank run literature rarely pays attention to where bank deposits can flow to, this paper distinguishes the different destinations of bank deposit leakages as a starting point of the analysis. It explains the flow of funds mechanics across all possibilities and reviews for each the current (and prospective future) changes that may contribute to the observed increase of the speed and size of bank runs. Financial stability implications and policy options are outlined. While some of the factors that contribute to the increased volatility of deposits can and should be contained through policy measures, other, like the intensified competition between banks will inevitably stay, and bank balance sheet management and liquidity regulation need to accept the new normal of somewhat less stable and more expensive sight deposits.

Speaker

Richard Senner, Senior Economist Swiss National Bank

Richard Senner works at the Financial Stability Division of the Swiss National Bank (SNB) on banking regulation, NBFIs (non-bank financial intermediaries), Fintech and climate risk. Prior to that, he worked at the Directorate-General Macroprudential Policy and Financial Stability at the European Central Bank (ECB). He gained a PhD in Macrofinance at the ETH Zurich and studied economics at the University of Mannheim and at Yale University. Earlier in his career, Richard Senner studied Physics at ETH Zurich and ENS Paris. His publications include, Explaining Global Imbalances: The Role of Central Bank Intervention and the Rise of Sovereign Wealth Funds (with D. Sornette, 2021), Stablecoins’ Quest for Money: Who Is Afraid of Credit? (with M. Chanson, 2023), and The globalization of climate change: How Interconnected Economies Amplify Physical Risks (with S. Fahr and A. Vismara, 2024).

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