> don't think that would need much retooling rather than a change in risks for banks to manage
In a crisis, it would make the narrow/public bank the natural place to drain deposits. (Similar to our SIFIs today.) As such, narrow banking would mean the end of commercial checking. That means we need to find non-bank providers of all the asset-side services, from lending to trade finance, banks currently provide. That's the re-tooling.
It didn't work like that in 2007/8 in Germany. Deposits didn't just all go to the Bundesbank/Finanzagentur. Maybe you need different banks in the mix, e.g., more coops. For lending, some alternatives exist already, same for trade finance. I think the delta to the current state would be surprisingly small.
I didn't say checking accounts, but money storage with the respective sovereign (and daily liquidity).
Was actually the German finance agency (same thing for our purposes really, as only daily risk is sovereign Germany). There were claims that lobbying by banks killed it, but it was also not very attractive in a low yield environment. Ostensibly, it was created to broaden the funding base of the Federal Republic, I think.
We once had postal banking in America [1]. I could see a bridge to narrow banking working if it’s restricted to natural person depositors and prohibited from paying interest or something. (And by extension, their reserves wouldn’t earn as much as their risk-taking peers.)
> money storage with the respective sovereign (and daily liquidity)
In a crisis, it would make the narrow/public bank the natural place to drain deposits. (Similar to our SIFIs today.) As such, narrow banking would mean the end of commercial checking. That means we need to find non-bank providers of all the asset-side services, from lending to trade finance, banks currently provide. That's the re-tooling.