Preventing and Managing Banking Crises: Smart Solutions Needed.
The failure of Silicon Valley Bank has highlighted the fragilities of the US banking system, particularly the critical role of large uninsured depositors, who constitute more than $8tn or approximately 40% of all US deposits. To address this problem, the US should create a special class of bank called a "payment bank" that does nothing more than process payments. Their deposit bases would be large and potentially volatile, they would be very tightly regulated, and they would be unable to take any credit or maturity risk. This solution would avoid uncapping the deposit insurance limit and making all banks systemically important.