I would draw the line at being 100% reserved.

As Ralph says, this isn't much of a product - for the client, it would cost a fortune, and for the business, I don't think there'd be enough clients to make it work.

Imagine a bank with about 10% capital to asset ratio, let's say $900m in deposits and $100m in capital, a total of $1b in assets invested to keep the numbers simple, and paying 1% on chequing accounts and making 3% by investing those assets in appropriately short-term treasuries, and having to pay for employees, buildings, IT, connection fees, etc. on the difference. So they're making $30m in revenue, and paying out $9m in interest to depositors, and with the $21m difference they have to pay all their expenses plus make a little profit for their $100m in capital invested, say 8% or $8m. Now you remove they're ability to make any income on the $1b in assets, and they save $9m in interest paid on deposits, so they're immediately $21m in the hole, and if they are still to return 8% to investors, they're $29m in the hole. So they would need to charge you over 3% a year for this service. If you have a $10,000 deposit, instead of getting $100 a year back, you have to pay $322. Not an easy sell.

I'm not sure what you mean by 100% reserved, since banks already have to be >100% reserved by law, meaning they need to have more assets than liabilities; in fact, they need to have about 10% more, which is the bank owners' capital. In the case of SVB, they maybe fell to just 100% (borderline insolvent) and so investors were wiped out and the bank had to be shut down.

dtb