Hacker News Reader

Comment by epolanski | Hacker News Reader

It's amazing how post 2008 nothing was learned by US and pretty much no major bank but top 10 is expected to have more than 5/10% of cash-like collateral of deposits.

In Europe, no single bank is allowed to have less than 100% collateral of deposits, not one, and yet they manage to make good money and profits nonetheless.

View on HN

AIUI, both the EU and the US primarily rely on Basel III for regulations, which means there's no meaningful difference in collateralization requirements of banks.

Okay, there is one meaningful difference: larger banks have higher requirements, and since the US banks tend to be larger, that means that the US tends to have higher requirements than the EU...

There's another, more meaningful difference: In the EU, all banks are subject to Basel III. In the US, only large, international ones are.

SVB wasn't.

> When the Fed implemented Basel III in October 2020, they took advantage of the fact that strictly speaking, the Basel Accords are only internationally agreed to apply to “large, internationally active” banks. While most jurisdictions apply the Basel rules to their entire banking system anyway, the US has a strong and powerful community bank lobby, and US community banks are usually quite aggressive in their use of the borrow-short/lend-long business model.

https://www.ft.com/content/c95e7708-b903-405d-a017-963844eb3...

EU only has 4 of the top 50 banks by market cap. the us has 10. I'm not saying the us system is necessarily better, but for two economies that are comparable in gdp, that's a big gap.

https://companiesmarketcap.com/banks/largest-banks-by-market...

Having a hard time finding any numbers about it, but how many banks fail in the US compared to Europe? And once they fail, how long time does it take to give people the money they are guaranteed via the insurances?

Supposedly, many countries in Europe require banks to have at least 100% collateral of deposits, this should mean resolution in the case of failure be much easier + bank runs less likely to happen, as people can feel safer that their funds actually exists in the bank is liquidity. Unless the bank is operating fraudulently that is.

how did it come to pass that the more concentrated a sector the better?

the exact opposite is true. excessive concentration means an oligopolistic or oligopsonistic sector that is holding everybody hostage: clients, employees and the political / regulatory system at large

adulation of "bigness", if not with ulterior motives, is naive

Yes, the US financial system allows bank to have more ways to make money. And lose it.

US is also the investment capital of the world, so it's quite unsurprising.

Which do you value more[1] in your jurisdiction: a larger market cap for banks, or having 100% coverage of depositor funds? Its no contest from my point of view.

1. Indirectly - which group do you value more: investors or depositors?

Does the EU require 100% _liquid_ collateral? Because European banks are also at risk from bank runs. Any bank that makes loans is.

SVB (probably) more than 100% deposit collateral. It just lost value very quickly.

Reply on news.ycombinator.com