Bank Business Models: The Key to Financial Stability

The stability of the financial system is critically linked to banks’ risk profiles, business models, and asset concentration. A roundtable discussion hosted by Wharton’s Future of Finance Forum highlighted the challenges faced by financial institutions, including liquidity, the size and composition of the banking ecosystem, depository insurance, supervision and examination, and proposed regulation. The collapse of Silicon Valley Bank (SVB) brought into sharp focus the systemic risk exception invoked by the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board. The discussion also emphasized the need to rethink the $250,000 deposit limit in the deposit insurance regime and the importance of maintaining a conducive environment for local and community banks to compete effectively.