TIME Security

Why Using An ATM Is More Dangerous Than Ever

A Bank Of America ATM is pictured in the Manhattan borough of New York
CARLO ALLEGRI—© CARLO ALLEGRI/Reuters/Corbis 21 Aug 2014, New York City, New York State, USA --- A Bank Of America ATM is pictured in the Manhattan borough of New York August 21, 2014. Bank of America Corp has reached a $16.65 billion settlement with U.S. regulators to settle charges that it misled investors into buying troubled mortgage-backed securities. The settlement announced on Thursday by the U.S. Department of Justice calls for the second-largest U.S. bank to pay a $9.65 billion cash penalty, and provide $7 billion of consumer relief to struggling homeowners and communities. REUTERS/Carlo Allegri (UNITED STATES - Tags: CRIME LAW BUSINESS POLITICS) --- Image by © CARLO ALLEGRI/Reuters/Corbis

Breaches have risen dramatically very recently

In a time when major data hacks are on the rise—think Target, Home Depot, Sony—it’s no surprise breaches on individuals are also up. According to FICO, debit-card compromises at ATMs rose 174% from January to April of this year, compared to the same period last year.

And that’s just breaches of ATMs located on official bank property. Successful breaches at non-bank ATMs rose 317% in that period.

In other words, withdrawing money from an ATM is more dangerous than it’s been in a long time—specifically, the worst it has been in two decades, according to the Wall Street Journal, which cites a prediction from consulting firm Tremont Capital Group that criminals will make more than 1.5 million successful ATM cash withdrawals this year,

As Fortune reported earlier this year, a majority of American corporations believe they will be hacked in 2015. The questions they are all dealing with is how to prepare for them and how to deal with them when they happen, because preventing these compromises has become increasingly difficult.

Banking institutions, as well as the payment companies that connect banks to consumers, like Visa and MasterCard, have beefed up their technology more aggressively than ever in order to both innovate and securitize. But for a private consumer who simply wants to take money from an ATM, stats like these are nonetheless sobering.

TIME Banking

New Survey Confirms Exactly What Everybody Hates About Wall Street

Five Years After Start Of Financial Crisis, Wall Street Continues To Hum
John Moore—Getty Images A street sign for Wall Street hangs outside the New York Stock Exchange on September 16, 2013 in New York City.=

Almost a quarter of bankers said they'd break the rules

Wall Street bankers are feeling a greater willingness to violate laws and ethics to get ahead, according to a new survey that finds no discernible impact from years of record fines and tightened regulations.

One-quarter of respondents said they would violate insider trading laws to make a $10 million return as long as they knew they wouldn’t get caught, according to a survey of 1,200 financial professionals conducted by University of Notre Dame at the behest of the law firm Labaton Sucharow. That was actually a slight uptick from the previous survey, when the percentage stood at 24%.

Respondents weren’t exactly impressed with regulatory oversight either. Nearly half deemed the regulatory agencies ineffective at detecting and prosecuting illicit behavior.

 

MONEY Banks

Bank Charged $50M in Illegal Overdraft Fees Says CFPB

Regions bank
Rosa Betancourt—Alamy

Consumers paid millions in illegal penalties to a bank that operates in 16 states, according to the Consumer Financial Protection Bureau.

Consumers were charged nearly $50 million in illegal overdraft fees by Alabama-based Regions bank, federal regulators said Tuesday. The bank, which operates in 16 states, failed to get consumers to opt-in to overdraft coverage, failed to stop charging illegal fees for nearly a year after it discovered the activity and also charged illegal fees in connection with its payday-loan-like “deposit advance” product, according to the Consumer Financial Protection Bureau.

Regions Bank operates approximately 1,700 retail branches and 2,000 ATMs, with a footprint that spans across the South and Midwest, from Florida to Texas to Illinois. It is one of the country’s biggest banks with more than $119 billion in assets.

“We take the issue of overdraft fees very seriously and will be vigilant about making sure that consumers receive the protections they deserve,” said CFPB Director Richard Cordray.

The CFPB on Tuesday ordered Regions to refund consumers and pay a $7.5 million fine, the first such fine levied under new overdraft rules set for banks in the Dodd-Frank financial reform bill.

“After discovering that a small subset of customers had been charged fees in error, we reported it to the CFPB and began refunding the fees. We believe the vast majority of the refunds have been completed and we have made changes to our internal systems to resolve these matters,” said Evelyn Mitchell, Regions spokeswoman.

Overdraft fees average about $35, and can be charged when consumers write checks or make electronic payments, purchases or withdrawals that exceed the available balance in their checking accounts. Prior to Dodd-Frank, consumers complained that they were often automatically enrolled in pricey overdraft coverage, which could cause them to incur $35 fees on small debit card purchases that sent their bank balances only a few dollars into the red. Dodd-Frank requires banks to simply reject such transactions unless account holders have affirmatively opted-in to the coverage.

But Regions kept on charging a subset of consumers overdraft fees without their express consent after Dodd-Frank took effect in 2010, the CFPB said. Regions customers who had previously linked their checking accounts to savings accounts or lines of credit were not asked to opt in for overdraft coverage, and kept on incurring fees as high as $36 per transaction.

Thirteen months after the mandatory compliance date, the bank discovered its error in an internal review, but kept charging the illegal fees for an additional year, the CFPB said. Finally, in June 2012, the bank’s computers were re-programmed to stop charging the fees.

It’s been a challenge for the bank to identify all impacted consumers. In December 2012, the bank voluntarily refunded $35 million to consumers who wrongly paid fees. In 2013, the CFPB alerted the bank to more victims, and it refunded an additional $12.8 million. This January, the bank found even more victims. The consent order issued by the CFPB today requires the bank to hire an independent consultant to identify any remaining consumers who are entitled to a refund.

The bank is also accused of making nearly $2 million by charging overdraft fees in connection with its deposit advance product after promising it wouldn’t charge such fees. Consumers who agree to a deposit advance loan receive money in their checking account in anticipation of a future deposit, often a direct deposit. When Regions collected from consumers’ accounts, and the payment was higher than the available balance, the bank sometimes changed overdraft fees, despite saying it would not do so. Between November 2011 and August 2013, the bank charged non-sufficient funds fees and overdraft charges of about $1.9 million to more than 36,000 customers, the CFPB said.

The bank was ordered to identify and fix any errors on consumers’ credit reports related to the illegal overdraft fees, and to pay a $7.5 million fine. The CFPB warned that the fine could have been higher. (Consumers can check for errors by getting their free annual credit reports from AnnualCreditReport.com, and can watch for issues by getting their free credit report summary, updated every month on Credit.com.)

“Regions’ violations and its delay in escalating them to senior executives and correcting the errors could have justified a larger penalty, but the Bureau credited Regions for making reimbursements to consumers and promptly self-reporting these issues to the Bureau once they were brought to the attention of senior management,” the CFPB said in a statement.

More from Credit.com

This article originally appeared on Credit.com.

TIME

Why Bad Bank Service Means You Could Pay More

We want more attention, they want more money

In the wake of the financial crisis, the Feds put the kibosh on a whole slew of bank tactics pertaining to overdraft fees, interchange fees (which they charge merchants when you use a debit card and which stores say get passed along in the form of higher prices) and credit card interest rate hikes. To cope, banks closed branches, invested in technology so they could replace costly branches and tellers with computers, and started trying to coax their more affluent customers into shifting their borrowing and investing activities from other institutions.

At the time, these actions made sense. Banking industry trade publications and white papers were full of buzzword-y terms like the “360-degree customer view,” which encouraged banks to think of a checking account as the financial services equivalent of the $1.99 chicken breasts at the supermarket: A loss leader that could reel in customers who would then stick around and buy more profitable items (like, say, a home equity loan or brokerage account). And banks poured money into their online offerings, mobile apps and upgraded ATMs that — the thinking went — could deliver customer service at the fraction of the cost of a teller depositing money or checking a balance for a customer.

But it didn’t turn out like that, according to a new study from consulting firm Capgemini and banking trade association Efma. The World Retail Banking Report shows that positive customer experiences fell among North American bank customers. “Return on investments in the front- office and digital channels are struggling to keep up with evolving customer expectations,” the report says.

The advancements in technology just built up people’s expectations — especially for tech-savvy younger customers. “Across all regions, Gen Y customers registered lower customer experience levels than customers of other ages, reflecting the high expectations Gen Ys have of banks’ digital capabilities,” the report says. The fact that young adults are less satisfied than customers in other age brackets shows that banks aren’t keeping up with the technological times, and less than half of American Gen Y bank customers say they plan to stay with their current bank over the next six months.

And yet, customers’ embrace and expectation of digital banking didn’t put the kind of corresponding dent in branch usage banks were seeking. In fact, the number of people using bank branches in North America actually went up — hardly the kind of digital revolution banks were seeking. Seems we’d still rather deal with a human being for most kinds of banking activities because we don’t think the digital service is up to snuff. “Customers still perceived the branch to be offering better service than what could be found on the digital channels,” the report says.

Banks’ cost-cutting moves in the service arena did some serious damage to customer satisfaction, dampening customers’ inclination to deepen their relationship with their banks or recommend the institutions to others, another key component of banks’ post-reform moneymaking strategy. “Alarmingly for the banks, there was a significant increase in the percentage of customers who were unlikely to buy additional products or refer someone to their banks,” the report says. In North America, that figure jumped by more than 20 percentage points in just a year.

The report blames this on growing competition to banks from other products and services like Apple Pay, LendingTree and Starbucks’ prepaid payment platform.

What could this mean for customers? If you said, “more fees,” you just might be on the right track. According to research company Moebs $ervices, financial institutions have collectively lost roughly $5 billion a year in overdraft fee revenue alone (although, if this sounds like a lot, keep in mind that they still made roughly $32 billion off these fees in the year that ended September 30, 2014, compared to around $37 billion just before the new laws kicked in.)

Moebs also says bank and credit union net operating income as a percentage of assets fell by nearly 7% last year from the year prior, driven by a drop in revenue from fees. “Financial institutions need to assess why fee revenue is falling and develop additional sources of fee revenue to get net operating Income back on track,” Moebs economist and CEO Michael Moebs wrote earlier this month.

And that technology we’ve grown to depend on might be the way to accomplish this. One recent study finds that a quarter of bank customers say they’d pay $3 a month just to use their bank’s mobile app, a figure that goes up to about a third for customers under the age of 35.

“Customers are willing to pay for services such as credit monitoring, person-to-person transactions, personal couponing, identity theft protection, and related other services,” a recent banking trade publication article notes, saying that if banks get on the ball, they could more than make up their losses from that declining overdraft revenue — probably not what all those already-frustrated customers wanted to hear.

MONEY Kids and Money

The Best Way to Bank Your Kid’s Savings

150403_FF_KidBankAcct
YinYang—Getty Images

After the piggy bank fills up, here's how to launch your child on the path of saving and investing.

When I told my 7-year-old that her wallet was getting full and it was time to open a bank account, her eyes widened. She wanted to know if she would be allowed to carry her own ATM card.

Um, no.

When transitioning from a piggy bank to handling a debit card linked to an active account, financial experts say it is best to start with a trip to a bank, but which one and when? Here are some steps to get started:

1. Bank of Mom and Dad

Don’t be in a rush to move away from the bookshelf bank, says financial literacy expert Susan Beacham. There are lessons to be learned from physical contact with money.

Sticking with a piggy can be especially effective if you teach your kids to divide their money into categories. Beacham’s Money Savvy Pig has four slots: save, spend, donate, invest.

When you cannot stuff one more dime into the slots, it is time to crack it open and seek your next teachable moment.

2. Neighborhood Convenience

Many adults bank online, but kids still benefit from visiting a branch, says Elizabeth Odders-White, an associate dean at the Wisconsin School of Business in Madison.

Do not worry about the interest, Beacham says. “A young child who gets a penny more than they put in thinks it’s magical. You’re not trying to grow their money as much as grow their habits.”

Your second consideration should be fees. Your best bet may be where you bank, where fees would be determined by your overall balance and you could link accounts.

Another option is a community bank, particularly a credit union, which are among the last bastions of free checking accounts.

“The difference between credit unions and banks is that credit unions are not-for-profit and owned by depositors,” says Mike Schenk, a vice president of the Credit Union National Association.

At either type of institution, you could open a joint account, which would be best for older kids because it allows them to have access to funds through an ATM or online, says Nessa Feddis, a senior vice president at the American Bankers Association.

Or you could open a custodial account, for which you would typically need to supply a birth certificate and the child’s Social Security number. Taxes on interest earned would be the child’s responsibility, but likely would not add up to much on a small account. A minor account must be transferred by age 18 to the child’s full control.

3. Big Money

If your child earns taxable income, the money should go into a Roth individual retirement account, experts say. There is usually no minimum age and many brokerage firms have low or no minimums to start an account. You can pick a mix of low-cost ETFs, and let it ride.

Putting away $1,000 at age 15 would turn into nearly $30,000 by age 65, at a moderate growth rate, according to Bankrate.com’s retirement calculator.

Not all kids can bear to part with their earnings, but there are workarounds. One tactic: a parent or grandparent supplies all or part of the funds that go into the Roth, akin to a corporate matching program.

The other is to work with your child to understand long-term and short-term cash needs. That is what certified financial planner Marguerita Cheng of Blue Ocean Global Wealth in Potomac, Maryland, did with her daughter, who is now in her first year of college.

While mom and dad pay for basic things like tuition, the teen decided to pool several thousand dollars from her summer lifeguard earnings, money from her on-campus job and gifts from her grandparents to fund several educational trips.

“She would make money investing, but it’s only appropriate if you have a longer time horizon,” says Cheng. “It’s not even about the money, it’s the pride she gets from paying for it herself.”

MONEY Banks

The Government Will Publish Your Banking Nightmare Story

The Consumer Financial Protection Bureau will start including the tales behind your banking complaints on its website.

MONEY Banking

The Easiest Way to Reduce the Bank Fees You Pay

Where to find free checking
James Worrell—Getty Images

Shift your money over from a big bank to a credit union

Looking to avoid those annoying—and expensive—monthly fees on your checking account? You might want to take your funds to a credit union.

A survey released Thursday by Bankrate.com found that 72% of America’s largest credit unions still offer standalone free checking accounts. And another 26% waive fees if customers meet certain requirements, like accepting e-statements or opting for direct deposit.

Credit unions look ever more attractive compared to the nations biggest retail banks—only 38% of which now offer free checking, down from 65% five years ago.

Even when credit unions do levy checking fees, those charges are typically between $2 and $3, about half of what traditional banks will deduct.

Prone to overdrawing your checking account? You’d do better at a credit union on that count, too. The average overdraft fee at unions is $26.78; the average for banks: $32.74.

In spite of the potential savings, however, a credit union isn’t right for everyone. Find out if you could benefit from becoming a member by checking our guide. And find a credit union that offers free checking with this list compiled by Bankrate.com.

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MONEY

The 5 Funniest ‘Saturday Night Live’ Skits About Money

SATURDAY NIGHT LIVE: WEEKEND UPDATE THURSDAY, (from left): Amy Poehler, Seth Meyers, Kenan Thompson, (Episode 101, aired Oct. 9, 2008), 2008.
Dana Edelson—©NBC/Courtesy Everett Collectio

As the NBC comedy show celebrates 40 seasons on the air, here are MONEY's picks for the best sketches making light of awkward bank ads, the financial crisis, and more.

Over the course of a four-decade run, Saturday Night Live has taken aim at most of the trappings of American financial life—even the things you wouldn’t think were funny, like stock market crashes and consumer debt. In honor of the show’s star-studded anniversary celebration this Sunday, here are MONEY’s favorite SNL sketches about money, spanning nearly all of its 40 years.

1. Fix It! (Parts One and Two)

In these two Weekend Update segments, Kenan Thompson plays Oscar Rogers, a “financial expert” who describes a path out of the 2008 financial crisis.

Best line: “Fix it! It’s a simple three-step process. Step one: Fix! Step two: It! Step three: Fix it! Then repeat steps one through three until it’s all been fixed!”

 

 

In that one phrase, Thompson gives voice to the powerlessness and frustration felt by laid-off workers and pummeled investors worldwide. (We wonder what John Belushi’s samurai stockbroker would have to say about that.)

2. First CitiWide Change Bank

This 1988 commercial parody—featuring Jan Hooks, Kevin Nealon, and Jim Downey—highlights just how unimpressive financial services can be, in an ad for a bank that brags about offering change to customers. And they don’t mean it in the Obama way.

 

Best line: “We are not going to give you change that you don’t want. If you come to us with a hundred-dollar bill, we’re not going to give you two thousand nickels—unless that meets your particular change needs.”

Joking about how weak bank services are would be funnier if it weren’t so true.

3. “Don’t Buy Stuff You Cannot Afford”

Steve Martin and Amy Poehler play a couple in need of a budgeting intervention in this 2006 skit, featuring Chris Parnell as the author of a, shall we say, intuitively titled book about how to control spending.

Best lines:

Parnell: The advice is priceless and the book is free.”
Poehler: “Well, I like the sound of that.”
Martin: “Yeah, we can put it on our credit card!”

If only getting out of debt were as simple as the skit suggests; in reality, paying off loans and gaining financial stability can be hard no matter how smart or hardworking you are. But we’d still pony up for a copy of Stop Buying Stuff magazine.

4. Consumer Probe: Irwin Mainway

This 1976 classic features Candice Bergen as a reporter and Dan Aykroyd as the sunglass-sporting Irwin Mainway, purveyor of such children’s toys as Johnny Switchblade, Mr. Skin Grafter, Doggie Dentist, and Bag o’ Glass.

 

Best lines:

Bergen: “I just don’t understand why you can’t make harmless toys like these wooden alphabet blocks.”
Aykroyd: “You call this harmless? I got a sliver!”

5. Metrocard

Roseanne Barr plays a 24-hour hotline representative for the fictional “Metrocard” credit card in this 1991 sketch, which sends up confessional-style TV ads highlighting service. Phil Hartman plays a seemingly satisfied customer.

Best lines:

Barr: “And then he gets really mad and tells me I’m supposed to help him! You know, like I’m his mom or something. So I say, ‘Why don’t you call home and have somebody wire you the money? Or call your company and tell them the problem? Or, better yet, why don’t you take a personal check out of your checkbook, roll it up real tight, and then cram it!'”

Hartman: “She gave me several options.”

TIME Saving & Spending

If You’re Going to Buy a Car, Do It Now

A General Motors Co. Car Dealership Ahead Of Earnings Figures
Daniel Acker—Bloomberg/Getty Images General Motors Co. Chevy Malibu vehicles sit on the lot at JP Chevrolet dealership in Peru, Illinois, U.S., on Wednesday, July 23, 2014.

If you need a car loan, this is your year

Financing a car — especially if you have good credit — has never been this cheap. Don’t wait too long to take advantage of this, though. By this time next year, if not sooner, borrowing costs will be ticking up again.

Personal finance site WalletHub.com surveyed 157 lenders and consulted with experts in a new report about car loans. The average car on the road today is about 11 and a half years old, so maintenance and repair costs are likely to be mounting. More than half of the experts consulted for this study say interest rates are likely to rise within 12 months.

Right now, though, financing is dirt cheap. Among all financing sources, the average APR on a new car loan for someone with good credit is right around 3% for new cars and just over 3% for used cars. The picture is brightest for people with credit scores above 720. On average, these buyers can get away with paying less than $1,600 in financing charges over the life of a 5-year, $20,000 new car loan.

For a new car, if you go through the manufacturer, the average best rate is right around 2% for a new car and just under 5% for a used car. Nissan, Toyota and Chrysler offer the lowest rates for customers with high credit.

The average at credit unions is also under 3% for new car loans. (One note: While the study looks at each manufacturer’s APR for a 36-month loan term, most car buyers opt for 60-month loan terms, which tend to have slightly higher rates. These averages also assume the buyer has good credit.)

The best deals can often be found by financing directly through the dealerships, the study finds. On average, dealers are offering rates 35% below average.

The study also suggests credit unions as a good place to look for a car loan, with rates 25% below average). National banks offer average rates, while regional banks tend to be more expensive, with rates 40% above average. Still, your milage may vary, as the saying goes, so it’s a good idea to check out all your options.

It also pays to shop around if you plan to lease. Although the report finds that Nissan, Volvo and Infiniti offer the best lease rates, many car companies’ financing arms are still lacking in transparency when it comes to the actual APR you’re getting, so you don’t actually know if you’re getting the best rate unless you do some legwork before you get to the dealership.

Even people with fair credit can benefit from today’s super-low rates. The study finds that people with credit scores between 620 and 659 will pay an average of just over $7,000 over the life of the loan, a drop of nearly $500 over the past three months. Across all lending sources, the average APR for someone in this credit bracket is about 12.5% for a new car and just over 13% for a used car.

Since that’s a pretty sizable gap, if you’re thinking of buying a car this year, it might benefit you to take some steps to raise your credit score before you go shopping — you could effectively be saving more than $5,000 over the life of the loan.

 

MONEY financial crisis

By This Measure, Banks Are Safer Today Than Before the Financial Crisis

150209_INV_BanksSafer
iStock

At least from the standpoint of liquidity, the nation's banks have come a long way over the last few years to build a safer and more stable financial system.

If you study the history of bank failures, one thing stands out: While banks typically get into trouble because of poor credit discipline, their actual failure is generally triggered by illiquidity. Fortunately, banks appear to have learned this lesson — though we probably have the 2010 Dodd Frank Act to thank for that — as lenders like Bank of America BANK OF AMERICA CORP. BAC 0.12% and others have taken significant steps over the last few years to reduce liquidity risk.

It’s important to keep in mind that banks are nothing more than leveraged funds. They start with a sliver of capital, borrow money from depositors and creditors, and then use the combined proceeds to buy assets. The difference between what they earn on those assets and what they pay to borrow the funds makes up their net revenue — or, at least, a significant part of it.

Because this model allows you to make money with other peoples’ money, it’s a thing of beauty when the economy is growing and there are no warning signs on the horizon. But it’s much less so when things take a turn for the worse. This follows from the fact that a bank’s funding could dry up if creditors lose faith in its ability to repay them, or if they need the money themselves. And if a bank’s funding sources dry up, then it may be forced to dispose of assets quickly and at fire-sale prices in order to pay its creditors back.

This is why some funding sources are better than others. Deposits are the best because they are the least likely to flee at the first sign of trouble. Within deposits, moreover, insured consumer deposits are preferable, at least in this respect, to large foreign, corporate, or institutional deposits, which carry a greater threat of flight risk because they often exceed the FDIC’s insurance limit.

The second most stable source of funds is long-term debt, as this typically can’t be called by creditors until it matures. Finally, the least stable source consists of short-term debt, including overnight loans from other banks as well as funds from the “repo” and/or commercial paper markets. Because these must be rolled over at regular intervals, sometimes even nightly, they give a bank’s creditors the option of not doing so.

It should come as no surprise, then, that many of the biggest bank failures in history stemmed from an over-reliance on either short-term credit or on large institutional depositors. This was the reason scores of New York’s biggest and most prestigious banks had to suspend withdrawals in the Panic of 1873, during which correspondent banks located throughout the country simultaneously rushed to withdraw their deposits from money center banks after panic broke out on Wall Street. This was also the case a century later, when Continental Illinois became the first too-big-to-fail bank in 1984. It was the case at countless savings and loans during the 1980s. And it’s what took down Bear Stearns, Lehman Brothers, and Washington Mutual in the financial crisis of 2008-09.

A corollary to this rule is that one way to measure a bank’s susceptibility to failure — which, as I discuss here, should always be at the forefront of investors, analysts, and bankers’ minds — is to gauge how heavily it relies on short-term credit and institutional deposits as opposed to retail deposits and long-term loans. If a bank relies too heavily on the former, particularly in relation to its illiquid assets, then that’s an obvious sign of weakness. If it doesn’t, then that’s a sign of strength — though, it’s by no means a guarantee that a bank is otherwise prudently managed.

One way to gauge this is simply to look at what percentage of a bank’s funds derive from short-term loans as opposed to more stable sources. As you can see in the chart below, for instance, Bank of America gets roughly 16% of its funds from the short-term money market. That’s worse than a smaller, simpler bank like U.S. Bancorp, which looks to the money market for only 9% of its liquidity, but it’s nevertheless better than, say, Bank of America’s former reliance on short-term funds, which came in at 31% in 2005. Indeed, as William Cohen intimates in House of Cards, one of the “dirty little secret[s]” of Wall Street companies prior to the crisis was how much they relied on overnight repo funding to prop up their operations.

A second way to measure this is to compare a bank’s funding sources to the liquidity of its assets, and loans in particular, as loans are one of the least liquid types of assets held on a bank’s balance sheet. This is the function of the loan-to-deposit ratio, which estimates whether a bank’s deposits can singlehandedly fund its loan book. If deposits exceed loans — though, remember that not all deposits are created equal — then a bank could theoretically withstand a liquidity run by pruning its securities portfolio or using parts thereof as collateral in exchange for cash. This would protect it from the need to unload loans at fire-sale prices which, in turn, could render the bank insolvent.

Overall, as the chart above illustrates, the bank industry has aggressively reduced its loan-to-deposit ratio since the crisis. In 2006, it was upwards of 96%. Today, it’s closer to 70%. It can’t be denied that some of this downward trend has to do with the historically low interest rate environment, which reduces the incentive of depositors to alternate out of deposits and into low-yielding securities. But it’s also safe to assume that banks have intentionally brought this number down to shore up their balance sheets, and in response to the heightened liquidity requirements of the post-crisis regulatory regime.

Whatever the motivations are behind these trends, one thing is certain: At least from the standpoint of liquidity, the nation’s banks have come a long way over the last few years to build a safer and more stable financial system. This doesn’t mean we won’t have banking crises and liquidity runs in the future, as history speaks clearly on the point that we will. But it does mean that, for the time being anyhow, this is one less thing for bank investors to worry about.

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