davidshort on Nostr: Fractional reserve banking means that no bank can survive a run unless deposits are ...
Fractional reserve banking means that no bank can survive a run unless deposits are insignificant to their overall liabilities. Even if all the bank did was mortgage lending, they wouldn’t be able to pay every depositor if they showed up at once because the mortgage is going to take 15-30 years to pay back. Duration mismatch is the fundamental nature of fractional reserve banking.
Published at
2023-03-15 19:50:55Event JSON
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"content": "Fractional reserve banking means that no bank can survive a run unless deposits are insignificant to their overall liabilities. Even if all the bank did was mortgage lending, they wouldn’t be able to pay every depositor if they showed up at once because the mortgage is going to take 15-30 years to pay back. Duration mismatch is the fundamental nature of fractional reserve banking.",
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