The Crescent
News from Packilvania22 April 2022
Post Bank files depositary insurance claim
The Post Bank of Packilvania (luMonaat luBarid aBakhilfaniya) has announced that it has filed a claim to the Depositary Insurance Corporation of Packilvania (luChubaal aluTamin aluKhiday aBakhilfaniya) for liquidity to help it honour its depositor's accounts. The bank had withdrawal requests that maxed out its cash on hand, and the bank was unable to convert its corporate bonds into liquidity quickly enough.The unexpectedly high demand for cash by consumers was largely due to many people withdrawing savings to mitigate the effects of prolonged floods that are causing many small businesses and working-class families that use the bankâs services to experience financial strain. Many of these are inhabitants of small communities along the banks of the Meked River. The floods have largely flown under the national media radar because of their fairly limited scale. However, the bank was disproportionately exposed to the risk because many of its clients are located in the affected areas.
The Post Bank was founded in 1989 out of the Postal Office of Packilvania (luBuriy aluBarid aBakhilfaniya). It uses post offices as bank branches where banking services can be provided. It also used the postal service to receive and send instructions from clients. It is wholly owned by the Postal Office (luBuriy luBarid). It provides retail investment and commercial banking services to the public. It held assets under management of 78 billion KRB and over 18 million clients in largely small towns. Many of its clients are small and medium-sized businesses such as sole proprietors and family businesses, as well as the working class in their late careers or early retirement.
The Post Bank was vulnerable to the flood because the Post Office has been using low-cost ferries to transport packages and post. Thus, most of its branches are located in towns that are close to rivers and susceptible to flooding. Therefore, most of its client base comes from people who make use of these postal banks and thus live in riverine towns. The base of consumers for the bank has been declining as the young use modern payment, investment, and conventional banking solutions. Their older clients have a lower velocity of money. Thus, the bank invested in bonds that, while liquid, are less liquid than cash and thus the time horizon for converting them to cash is longer than the withdrawal time horizon. As such, a large withdrawal request was not factored into its stress tests.
The Packilvanian Central Bank has been criticized for failing to consider the weaknesses of business models in its stress tests for smaller banks. Dr. Uramid Nekhad, the central bankâs governor has suggested that the Post Bank would be saved and urged the public to remain calm as the Depositary Insurer can help to mitigate this recent withdrawal shock.