Massive withdrawals of deposits, mortal danger for banks: reflections are being carried out to better predict this risk, which has become very concrete with the recent bank failures in the United States, indicated the executive director of the European Banking Authority (EBA), heard this Wednesday. by the finance committee of the French Senate.
“There are questions to be asked about the speed of withdrawal of deposits (…), reflections on the subject have begun,” François-Louis Michaud declared before the French senators, noting that “we have entered a new world with the digital applications that allow people to transfer their deposits much faster than before.”
“If confidence disappears, the flight of deposits can be fast”
The sudden bankruptcy of the US bank Silicon Valley Bank (SVB) in March, triggered by massive withdrawals by customers, once again brought the phenomenon of the “bank run”, or bank panic, to the fore. A bank, despite the phenomenal amount of money it handles, does not have the cash to reimburse all of its customers if they suddenly decide to withdraw all their money. Although nothing justifies panic, it is enough that certain fears arise for the machine to run.
Losses at Credit Suisse, taken over in disaster by UBS in March, have also been accentuated by major withdrawals since late last year. “If confidence disappears, the flight of deposits can be rapid,” stressed François-Louis Michaud, although he added that there were “instruments to deal with it.” For example, banks are required to maintain a minimum percentage of highly liquid assets.
The notion of trust in banking establishments is also a priority for the policeman of French banks, represented on Wednesday before the senators by the deputy secretary general of the Prudential Control and Resolution Authority (ACPR), Evelyne Massé. She highlighted the “vigilance” of the institution on the issue. “We are on alert”, closely analyzing “the possible vulnerabilities of each one”, said Evelyne Massé.
Source: BFM TV
