During the current crisis, many people were #surprised “at the extent of the duration #mismatch and lack of interest rate hedges at SVB, as well as the extent of Circle’s exposure to this bank,” said Clements.

The asset-to-liability #mismatch, although common in most situations for banks, was #untenable in the current scenario due to the sharp decline in deposits.

#same time. But what happens when this assumption fails? The answer lies in the asset-liability #mismatch of banks, which can lead to disastrous

It is worth noting that many banks #experienced an asset-liability #mismatch during the GFC because they funded long-term assets with short-term liabilities, leading to a funding shortfall when depositors withdrew their funds en masse.

 leading to a #mismatch that can cause #significant losses if interest rates change.

But what happens when this #assumption fails? The answer lies in the asset-liability #mismatch of banks, which can lead to disastrous consequences for the broader financial system. 

The ability to borrow secured from the Fed at par (rather than at market prices) only helps in a distress #situation and does not address the #mismatch in assets/liabilities and over-reliance on zero-interest large deposits

QCP #continued that there was a #mismatch between expectations and reality when it comes to the Federal Reserve lowering interest rates despite inflation notionally subsiding.