Why is cash considered a liability for banks?

Question

Curious. Trying to understand what’s happening with svb, and this concept does not click yet.

In: 1

Answer 1

They don’t own the cash. The cash they have is from people depositing money with their bank. Eventually those people will want their money back. The cash is not an asset that the bank owns, rather it is something they have to pay back eventually to their customers. Therefore it is a liability.