Ok, I'm starting a new bank and everyone will be able to withdraw all at once, bank runs will be a thing of the past, your interest rate will be 0.00000000000000000000000000000000000000000000000125%
A positive interest rate? That's a no brainer steal.
Basically you're saying you'd pay the customer for the privilege of not being able to use their money...
A bank that keeps 100% funds as reserve to accommodate any withdrawal pattern not only cannot give any interest, it would need to _charge you_ a maintenance fee to cover the costs of holding your money as well as charge you a per-transaction fee to cover the cost of moving it.
And it wouldn't be some symbolic amount like $30/mo. After all, the maintenance fees across all the accounts would need to cover all operating expenses (wages, facilities, utilities, consumables etc.) otherwise the bank would literally lose money to run the transactional account program.
Sounds fine by me. I get better returns investing in index funds anyway, my bank account is literally just somewhere to park my liquid money and direct my paycheck to because stuffing it under my mattress would be too unsafe.
Banks should differentiate between accounts where you're safely parking your money, and accounts that are actually low risk investments. And they ideally would offer both of those things. I see no downsides here.
Banks do differentiate. If you have an account that is <$250K, you're covered by the FDIC, which essentially makes it zero risk, irrespective of the account's associated interest payments.
If you are a privately owned bank with a small group of similar minded shareholders who are not looking for a lot of ROI and also the bank should not issue any bonds and raise debt then it may work.
Given that you can only accept maybe 20x[1] of the equity investment. Is it possible to raise $15B in equity financing with this model ? Otherwise this bank cannot service the volume deposits of SVB and it would be a just small novelty bank.
Banks have significant costs and expectations of growth, shareholders to satisfy, which is why they take risks. Risks that are regulated - which perhaps not strong enough (Basel III) are still pretty strict
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[1] Ignoring risk weights etc, you would need at least 5% of the deposits in equity to be "Well Capitalized". The number goes higher depending on risk factors.
Mine does. Usually the highest interest rate checking accounts have requirements such as direct deposits and/or linked credit/debit card transactions. But, even the big banks in the US pay more than zero (very slightly more like 0.01-0.05%).
