> they need to balance deposits with risk free loans
You mean "reserves". This is the reserve requirement of banks which they need to hold for deposits. These reserves are held by their responsible central bank. Which they need to pay for in the Euro zone (that's what it means federal fund rates being negative). So this gets me back to my initial point: Banks depend on the federal fund rates. DeFi systems do not.
But I agree with you, higher yields do reflect higher risks. Of course, depositing money in DeFi protocols is still riskier than leaving it on your bank. But bringing money to your bank means you're so risk averse you're willing to lose money for keeping your money. At least inside the Euro zone, currently.
You mean "reserves". This is the reserve requirement of banks which they need to hold for deposits. These reserves are held by their responsible central bank. Which they need to pay for in the Euro zone (that's what it means federal fund rates being negative). So this gets me back to my initial point: Banks depend on the federal fund rates. DeFi systems do not.
But I agree with you, higher yields do reflect higher risks. Of course, depositing money in DeFi protocols is still riskier than leaving it on your bank. But bringing money to your bank means you're so risk averse you're willing to lose money for keeping your money. At least inside the Euro zone, currently.