Not if the deposit and loan are duration matched.
"I want my money back."
"Sure, you can have it in two years."
"I want my money back."
"Sure, you can have it in two years."
“Sorry we have to wait for someone else to want a loan”
If you’re trying to solve one extremely rare problem (bank runs) by completely dismantling a much demanded and commonly used banking feature (interest bearing accounts with liquidity) then sure, this would do it.
But nobody actually wants that.
I've never seen a bank that only offers CDs. That's probably because such a bank wouldn't survive.
Because the rates suck, but that hasn’t always been the case.
If you were charged a small nominal fee for your demand deposits, you would likely say "OK, I'll keep a certain amount in my demand deposit account, and then put the stuff I don't need into longer duration deposits, so I can get some interest."
This would be the right thing, and that money could be safely loaned out at durations shorter than you deposited. You would then be signalling to the market exactly what the demand is for money over time, and it could respond appropriately.
To an extent you do this today: you don't keep all your money in demand deposits, you instead put a lot in the market or whatever. Back in the day, you might have even bought a CD, which is almost exactly what I'm describing, sans the requirement that banks not loan funds they can't guarantee are available for the duration of the loan.
So it's not as crazy as it sounds. It's still crazy, but not as crazy as it sounds.
In this make believe banking system that I am making up. :)
For the financial sector at large, treasuries and bonds make up the vast majority of the market
A bank that only offers CDs or other long-duration deposits would be pretty weird.
Why?
CDs are insured by the FDIC. That gives people the same amount of confidence in all CDs no matter what bank they get them from.
And most banks probably have much more money deposited in checking and savings accounts than in CDs.