Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 7, 2023 erstellt
Description:
Banks' relationships with their depositors are valuable when depositors remain sticky, but this value evaporates if they leave. This tension makes banks fragile when interest rates increase and long-term asset values are depressed. In this scenario, if all of its depositors leave, the bank fails, which justifies depositors' departure in the first place. Such failures can happen even when banks only invest in liquid assets and when deposits are insured, and they are more likely for banks with the most valuable relationships. This fragility leads to sharp changes in the exposure of bank values to interest rate risk: insensitive most of the time but highly responsive when asset losses are about to catch up with them. This non-linearity complicates the evaluation of capital adequacy, with neither mark-to-market nor hold-to-maturity providing an accurate picture of bank health. We find evidence consistent with these mechanisms during the rate increase of 2022 and 2023, culminating with the failure of Silicon Valley Bank