Quote:
Originally Posted by opendoor
Yeah, that bank's average remaining bond duration was over 6 years which seems crazy given who they catered to. They assumed that withdrawals wouldn't exceed their bond maturity pace, but they bet wrong.
I also wonder if the removal of the Dodd-Frank Act in 2018 played a part in this. Before it was removed, smaller banks (sub $250B like this one) were subject to federal stress testing and had higher cash reserve requirements to mitigate shocks.
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Well fixed-income 101 is literally duration management, so regardless of the regulation, anyone prudent should be managing that risk!