Citi CEO Jane Fraser went on David Rubenstein’s Bloomberg show to about the 2023 bank crisis, and noted a downside of the fintech revolution: digital age bank runs happen in real time.
Rubenstein asked her if being able to move money in seconds using your iPhone is a factor in bank runs, and she said:
It’s a complete game changer from anything we’ve seen before. There were a couple of tweets, and this thing went much faster than has happened in history. And the regulators did a good job responding very quickly. Because normally you have longer to respond to this.
It’s important to reconcile the first and last parts of her statement.
The game has indeed changed with real-time, push-button money movement at the consumer level. So real time digital age bank runs are the new normal.
Going forward, there will never be a shorter time for banks and regulators to respond to this.
I don’t see regulators taking any action that would create delays any longer than it takes to do an ACH (2-5 business days) or wire (1-2 business days) transfer of funds.
Consumers wouldn’t buy this. We want both real-time access to and real-time protection of our funds.
Regulators have the sh!t job of meeting all these whims, and getting blamed regardless of what they do.
You bailed out the banks. You didn’t protect all my deposits fast enough.
The Fed isn’t killing inflation fast enough. The Fed’s hikes are killing the banks.
Which brings us to Fraser’s comments on depositors and the Fed.
On the job of banks and regulators in protecting depositors, Fraser said:
It’s very important to protect the depositors. Right now the banking system everywhere around the world depends on confidence. And that confidence has to be in the security and safety of the deposits. So the [government] did the most important job here, which is making sure the depositors were whole.
And on the Fed’s top priority job in 2023, Fraser said:
The Fed’s job number one is fighting inflation, and we want the Fed to be very dependable in fighting inflation. And that should be their most important priority. There are ramifications of it. But there are a certain isolated few banks have been impacted very negatively that didn’t necessarily manage their balance sheets that well in retrospect.
I agree on all counts. Fraser’s got it down.
I’ve queued the video link below to these sections I’ve covered.
Please comment if you think banks and regulators are getting the 2023 banking crisis and inflation fight right or wrong.