Bank Runs Trash Long-Held Assumption on Deposits
Regulators and lenders valued customer accounts higher when rates rose
The recent spate of bank failures is upending a long-held theory among banking executives and regulators—that the value of a lender’s deposit business goes up when interest rates move higher.
The theory rests on an assumption: That banks don’t have to pay depositors much to keep their money around, even as rates rise. The deposits would be a stable source of low-cost funding while the bank earned more money lending at higher rates.
The...
