Deposits, margins, capital and runs: how a bank earns and how it fails.
A bank fails when its liabilities come due faster than its assets, which can happen to a solvent bank.
Any banking interview question on runs, deposit insurance, liquidity rules or March 2023.
From It's a Wonderful Life · 1946
A limit is an escalation rule: it decides when a problem must move up the firm, not just how big it may be.
Markets and risk interviews, especially the question of what a risk function actually does.
From Margin Call · 2011
The 2023 runs redistributed deposits towards the largest banks and exposed a pricing gap that already existed; they did not reprice the system.
Any question about the 2023 banking crisis, deposit flight or the funding advantage of the largest banks.
From Deposits and the March 2023 Banking Crisis–A Retrospective · Stephan Luck and Matthew Plosser, Federal Reserve Bank of New York (Liberty Street Economics)
A rescue that swaps assets at fair value changes nothing; only new capital changes a bank's solvency.
Banking crises, bailout design, and the interview question of what a capital injection does that asset purchases do not.
From John Hussman's October 2008 market comment on recapitalising the banks · John Hussman
Lending cures illiquidity; only capital cures insolvency. Decide which problem you have before choosing the remedy.
Questions about why Lehman was allowed to fail and AIG was not, about central bank lending, or about any distressed situation.
From Too Big to Fail · 2011
A firm that did what the rules allowed and lost has not been excused by the rules; management chose the position.
Banking interviews, risk culture questions, and any post-mortem that reaches for the regulator as the explanation.
From JPMorgan Chase letter to shareholders, 2008 · Jamie Dimon
A bank's margin in a hiking cycle is decided by how slowly it reprices its deposits, measured as the deposit beta.
Bank earnings, FIG coverage, and any interview that asks how rising rates affect a bank.
From Is This Time Different: How Are Banks Performing during the Recent Interest Rate Increases Compared to 2004-2006? · Anya Kleymenova, Lori Leu and Cindy M. Vojtech, Board of Governors of the Federal Reserve System (FEDS Notes)
In any industry, ask who holds the data the models need; the shift favours them more than the vendors of the models.
Bank and fintech coverage, the question of who wins from AI in finance, and any moat built on data.
From Capital One's 2024 letter from Rich Fairbank · Rich Fairbank
Institutional AI is scoped, governed and data-limited; expect to work inside those limits and to be able to explain them.
Questions about AI in banking, technology roles inside financial firms, and any claim about what AI is doing to the industry.
From Goldman CIO Marco Argenti on the Warp-Speed Improvements in AI · Bloomberg Odd Lots
Prepare for the parts of the job the tools make scarce, judgement and client sense, rather than the parts they make cheap.
The interview question about what AI changes for an analyst, and planning what to get good at before you start.
From Goldman Sachs CEO David Solomon on AI, Debt and America’s Future · Prof G Markets