Hailey Johnson
The US banking system is highly vulnerable to a run on banks by uninsured depositors due to a recent rise in interest rates by the Federal Reserve. In March 2023, the California Department of Financial Protection and Innovation (DFPI) seized SVB, causing a bank run. This was followed by large interbank flows of funds to stabilise balance sheets. The Federal Reserve discount window liquidity facility experienced approximately $150 billion in borrowing from various banks by March 16. The US banking system is fragile, with a substantial number of institutions at risk of failing.
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What You'll Learn
Bank holidays
A bank holiday is a day when financial institutions are closed for business. However, online banking services usually remain operational. Bank holidays are usually federal holidays, such as New Year's Day, Easter, and Christmas. In the UK, public holidays are commonly referred to as bank holidays. These holidays can fall on weekends, in which case a 'substitute' weekday, usually the following Monday, becomes a bank holiday.
In the United States, bank holidays are scheduled on specific dates, such as January 1st for New Year's Day, the third Monday in February for Washington's Birthday, and the first Monday in September for Labor Day. These holidays may not always coincide with stock market or capital market holidays, and each country defines its own bank holidays.
In 2023, the Federal Reserve recognized the following bank holidays:
- Jan. 1 (New Year's Day) - Observed on Jan. 2
- Jan. 16 (Martin Luther King Jr. Day)
- Feb. 20 (Washington's Birthday)
- May 29 (Memorial Day)
- July 4 (Independence Day)
- Sept. 4 (Labor Day)
- Oct. 9 (Indigenous People's Day)
- Nov. 11 (Veterans Day) - Fell on a Saturday
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Online banking
To use online banking, customers typically need to enrol or register for the service, creating a secure username and password to access their accounts. It is important to keep this login information confidential and to log out of your account when you have finished using it. Many banks also offer two-factor authentication, such as sending a one-time passcode to your mobile phone, as an additional security measure.
In terms of security, online banking uses industry-standard protocols and encryption to protect your data. Encryption ensures that any information transferred between your browser and the bank's website is secure and cannot be intercepted by unauthorised individuals. Some banks also offer digital security guarantees, covering customers in the event of unauthorised transactions.
While online banking is generally reliable, there may be times when the service is temporarily unavailable due to technical issues or maintenance. In such cases, banks typically notify customers through their websites or mobile apps and provide guidance on how to resolve any access issues. Overall, online banking provides a convenient and secure way for customers to manage their finances remotely.
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ATM access
Accessing your money through an ATM is a convenient way to manage your finances. However, there are times when ATMs may be temporarily unavailable.
In recent times, there have been reports of multiple ATMs being "shuttered" or temporarily out of service. This appears to be due to a security breach where hackers infected ATMs, causing banks to shut down their machines as a precautionary measure. In such situations, it is advisable to contact your bank directly or use alternative methods to access your funds, such as through a bank teller or mobile banking app.
To ensure a smooth experience when using ATMs, it is important to be aware of certain considerations. Firstly, always shield your PIN entry by covering the keypad with your hand or body to prevent it from being seen or captured by surveillance cameras. Secondly, some ATMs may only support four-digit PINs, and it is recommended to know your PIN by numbers as some international keypads lack letters. Additionally, be cautious when depositing cheques or cash, as folded or damaged items may not be readable by the ATM scanner, and there may be delays if cheques are not properly endorsed.
To enhance your ATM experience, many banks offer customisation options. For instance, you can set a Cash Preference or Fast Cash amount, allowing you to quickly withdraw your preferred amount. You can also select your language, receipt options, and bill denominations. These features are designed to provide a more efficient and tailored transaction process.
By being mindful of security measures and utilising the customisation features offered by your bank, you can optimise your ATM access and maintain control over your finances.
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In-branch services
While the banking sector has embraced online services, in-branch services remain crucial for several reasons. Firstly, in-person customer service is essential for specific transactions, such as complex financial services or financial guidance, mortgage applications, and small business lending. These services may require face-to-face interactions, especially for older, wealthier, or self-employed individuals who prefer in-person consultations.
Secondly, physical branches provide access to cash through ATMs, which remains a vital function for many customers. The availability of ATMs ensures that customers can conveniently withdraw or deposit cash and perform other transactions that may be challenging to complete online.
Thirdly, bank branches offer a sense of community and accessibility. Certain communities, particularly those in rural or underserved areas, rely on local branches for their banking needs. The closure of these branches could result in banking deserts, leaving residents with limited or no access to traditional banking services.
Finally, bank branches are evolving to meet the changing needs of customers. Some branches are being transformed into smart branches, with a focus on self-service technology and streamlined layouts. These smart branches utilise interactive digital walls, robot greeters, and video-conferencing rooms to enhance the customer experience. Additionally, banks are exploring artificial intelligence to increase efficiency and support customer service, allowing employees to spend more time on personalised interactions.
Despite the growing trend towards digital banking, physical bank branches continue to play a significant role in the industry. They provide essential services, ensure accessibility, and offer a more personalised experience to customers who prefer or require in-person interactions.
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Federal Reserve interest rates
The Federal Reserve influences the federal funds rate, which is the interest rate charged by banks to borrow from each other overnight. The Federal Open Market Committee establishes the target rate or range for trading in the federal funds market. The Federal Reserve lowers interest rates when it wants to stimulate the economy and raises them to cool the economic growth.
In August 2025, the Federal Reserve faced pressure from the Trump administration to cut interest rates. Despite this, the Federal Reserve was hesitant to change interest rates due to uncertainty over President Donald Trump's tariffs. Inflation had also come down significantly from its post-pandemic spike and was sitting at around 3% over the past year. The job market was also healthy, despite a slowdown in hiring and higher unemployment.
Most economists polled by Reuters predicted a Federal Reserve interest rate cut in September 2025, with another cut to follow before the end of the year. This forecast was made amid rising concerns about the health of the economy, with US inflation rising and big downward revisions to hiring figures. Over 60% of respondents predicted there would be one or two rate cuts in 2025, with no consensus on where the federal funds rate would be at the end of the year.
The Federal Reserve's interest rate cuts would immediately make borrowing cheaper on credit cards and auto loans, as these products are based on the short-term interest rates heavily influenced by the central bank. However, mortgage rates are influenced by a complex mix of factors, including investors' expectations of the economy and inflation over the next decade, economic growth forecasts, inflation, demographics, and US fiscal deficits. While the Federal Reserve does not set mortgage rates directly, it does have an indirect influence on long-term rates.
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Frequently asked questions
No, several banks failed or were shut down by regulators in 2023. The first bank to fail, Silvergate Bank, announced it would wind down on March 8, 2023. Two days later, a bank run occurred at Silicon Valley Bank, causing it to collapse and be seized by regulators.
The primary cause was the Federal Reserve's decision to raise interest rates in response to the 2021-2022 inflation surge. This led to a decline in the market value of bank capital reserves, causing some banks to incur losses. Additionally, the popping of the 2020-2022 cryptocurrency bubble in late 2022 further contributed to the crisis.
The FDIC took steps to protect depositors' funds. For example, they established a deposit insurance national bank and announced that they would pay dividends for uninsured deposits. However, there was a risk of insolvency for many banks, which could have impacted depositors' access to their funds.
