On June 24, the U.S. Under Secretary for Domestic Finance, Nellie Liang, delivered a speech at the 2024 OCC Bank Research Symposium addressing depositor behavior, bank liquidity, and run risk. Liang discussed the spring 2023 bank runs that led to exposures in financial vulnerabilities, and highlighted how technologies and social media “amplified” these vulnerabilities as depositors withdrew their monies rapidly. When discussing the evolution of the banking model, Liang shared that, despite the spring 2023 events, deposits have steadily grown relative to GDP over the past 40 years, displaying banks’ continued benefit to provide liquidity services. Nonetheless, loans and credit lines to non-bank financial intermediaries (NBFIs) have increased.

Among other things, Liang stressed the need for supervisors and regulators to effectively monitor core vulnerabilities, like those that were the “key drivers” of recent runs and called for banks to have the operational capacity to borrow from the discount window. She further highlighted the need to increase transparency of Federal Home Loan Bank (FHLB) practices, noted how the proposal for pre-positioned collateral requirements at the discount window was promising, but raised ultimately questions regarding the type and amount of collateral required, and raised the need to re-examine deposit insurance coverage.