Full reserve banks are possible. You just have to maturity match everything, meaning every loan of term t has a matching deposit with a maturity of t. Deposits in demand accounts could not be lended.
I have no idea whether this is a good idea or if it would work as a business.
That's sort of the idea behind securitized mortgages, except once the bank makes the loan the bank leaves the picture (except perhaps as a custodian responsible for payment collection sometimes.) This is one reason securitization of mortgages led to lower interest rates and was generally considered a good thing for a while.
In the alternative scenario, economists describe loaning from demand deposits (at a higher interest rate) with a phrase like "the bank is selling liquidity".
The retail markets have voted overwhelmingly for interest bearing demand deposit accounts. I'm not sure if a fee-based DDA is available anywhere but it certainly is not popular in the US where we get "free" deposit insurance.
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Full reserve banks are possible. You just have to maturity match everything, meaning every loan of term t has a matching deposit with a maturity of t. Deposits in demand accounts could not be lended.
I have no idea whether this is a good idea or if it would work as a business.
That's sort of the idea behind securitized mortgages, except once the bank makes the loan the bank leaves the picture (except perhaps as a custodian responsible for payment collection sometimes.) This is one reason securitization of mortgages led to lower interest rates and was generally considered a good thing for a while.
In the alternative scenario, economists describe loaning from demand deposits (at a higher interest rate) with a phrase like "the bank is selling liquidity".
The retail markets have voted overwhelmingly for interest bearing demand deposit accounts. I'm not sure if a fee-based DDA is available anywhere but it certainly is not popular in the US where we get "free" deposit insurance.