In this forerunner to deeper IIF analysis that will follow in 2019, we look at some potential scenarios where innovative disruption could have an asymmetric effect on banks’ balance sheets. We identify possible impacts on the stability of retail deposits, which are generally assumed (and reflected under Basel III regulations) as a preferred and “sticky” source of bank funding. We observe that banks have steadily repositioned their funding mix over the last decade to ensure greater stability, but we may enter a new paradigm where the management of funding and liquidity risk will be more dynamic.

There are some key implications with the emergence of platform deposits, and for the design of potential Central Bank Digital Currencies. While some of these issues are still quite speculative at present, these scenarios warrant further exploration, and the IIF will be pursuing these further in the new year.