Community
I imagine there's a bit of fund juggling going on at banks across America. Given that only the first $100k is covered by federal deposit insurance it would be wise to spread your cash across a number of financial institutions to maintain insurance coverage in the event of a collapse of an individual institution.
Australia is not immune to the recent turmoil and at least one Aussie bank will be making some multi-billion dollar 'readjustments' in the near future.
I once looked at a risk scenario where banks were vulnerable to a run, just by virtue of the fact that they don't actually have much cash on the premises. Some institutions require advanced notice of withdrawals over a few thousand in order to make certain they have the cash available. Cash is pooled accross branches and institutions on demand. I looked at the possibility that a large number of peopl, either by design or coincidence, went to a particular branch and queued up to withdraw their money. It probably wouldn't take too many queuing up outside a branch and orders for cash delivery would be sent out. What might the effect be? Could enough people waiting outside a branch complaining about the bank not having enough cash, on a major thoroughfare in peak hour influence other customers or even those of other banks? Could it start a run? What if it was reported in the media? In todays climate it just might happen.
Trust is a fragile thing. Can we keep 'banking on' banks - especially when they don't even secure our funds anymore if we internet bank?
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Alexander Boehm Chief Executive Officer at PayRate42
22 August
Alex Kreger Founder & CEO at UXDA
Nick Green Director at Purple Patch Broking Ltd
Priya Kumari
20 August
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