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Why isn't the Federal Reserve requiring banks to hold depositors' cash?

Published 03/15/2023, 03:16 PM
Updated 03/15/2023, 05:00 PM
SBNY
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The Federal Reserve Board reduced banking reserve requirements to zero in March 2020. Since that time, banks in the United States have not been required to actually hold any depositor money in the bank, making a flawed system — fractional reserve banking — worse.

With Silvergate Bank, Silicon Valley Bank and Signature Bank (NASDAQ:SBNY) now shuttered, many in the U.S. are wondering if regional banks pose the same risks. Zero reserve policies at the Federal Reserve only make further bank collapses more likely.

Kadan Stadelmann is a blockchain developer and the Komodo Platform’s chief technology officer. He graduated from the University of Vienna in 2011 with a degree in information technology before attending the Berlin Institute of Technology for technical informatics and scientific computing. He joined the Komodo team in 2016.

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