SVB’s Collapse Resurrects the Idea of Banking Without Bank Runs

The collapse of three regional US banks this spring is a reminder that, at their heart, banks are risk-taking businesses. For most depositors, banks are risk-free thanks to federal insurance of as much as $250,000. That’s why “like money in the bank” is shorthand for a sure thing. In reality, of course, the money that people keep in the bank isn’t sitting in cash. Deposits are a liability of the bank—a short-term debt it owes to its customers. On the other side of its balance sheet are a bank’s longer-term loans and investments. If its bets go the wrong way ...