uk.finance

>> "Virgils Ghost" wrote
>>> No surprises there, what's their loan to deposit ratio, 328%?
>>
> "Tim" wrote
>> It was actually a good job that the ratio was that high when
>> the "run" happened around the weekend -- with around a
>> tenth of all deposits being withdrawn, if the ratio had been
>> closer to 100% (with the same level of loans) then a
>> lot more than £2billion would have been withdrawn!!
>
"Virgils Ghost" wrote
> Err, if their capital adequacy ratios were 100% then
> they wouldn't have needed any external funding,
> hence no crisis and no resulting run on the bank.

Yes, I know. But that doesn't stop it helping after the run started!

With the general public having now shown that their actions
can be quite irrational, creating a run on a bank even when
their deposits were still safe, it appears that any solvent bank
might be affected by this irrationality of the general public.
Who knows what might cause them to do it next time?

Hence, as the public have shown that even safe banks risk having a
run on them, surely it's better for the bank to be in a position where
the effects of any run would be reduced somewhat? This means
that the larger the loan to deposit ratio of any bank, the better!!

;-)