How “Payment Banks” Could Prevent the Next Bank Collapse

The failure of Silicon Valley Bank has highlighted underappreciated fragilities of the U.S. banking system. While banking crises have historically centered on credit risk, this recent crisis of confidence stemmed from unrealized losses on safe securities that made depositors anxiously seek liquidity. The liquidation of those securities crystallized mark-to-market losses and amplified the anxieties of these depositors, and a bank run ensued.