Rethinking The Banking System In The Age Of Digital Fragility

The article "Rethinking The Banking System In The Age Of Digital Fragility" delves into the vulnerabilities of traditional banking systems amid rapid digitalisation. It discusses how digital platforms can accelerate bank runs, eroding depositor confidence swiftly.

The piece explores concepts like "narrow banking," where banks maintain 100% reserves with minimal leverage, and the rise of alternative lending models, such as non-bank lenders and fintech platforms. The article underscores the importance of proactive regulation to ensure these new models contribute to a more resilient financial system in the digital age.

Notably, the article includes insights from Francesco Filia, who emphasises the urgency for wealth managers to diversify strategies and partner with institutions capable of withstanding digital-age shocks. He highlights the structural imbalance in traditional banking, where short-term liabilities are mismatched with long-term assets, and advocates for models that offer greater capital preservation and liquidity.

Read the full article here.