The case for a less deposit-intensive banking model

The current banking model is distorted by government subsidy to banks financing risk, in the form of explicit deposits guarantees and implicit bailout guarantees. Starting from the financing model of bank intermediation, we argue for a self-sufficient banking architecture based on the securitization model. We propose the “15/30–20/40” rule relying on a double equity and non-deposit debt/bonds cushion, making client deposits a safe asset that is able to perform its monetary functions without the need for government guarantees. Finally, we show how CBDC can contribute to the stability of the monetary and financial system.