Should we worry that Ai agents will cause a bank run? Maybe! Torsten Slok has an interesting note worrying about increased competition for deposits potentially causing bank runs. Slok’s worry is households will rely on AI agents to allocate deposits to the highest yielding bank. The result will either be runs on the deposits of banks with uncompetitive rates or (more likely IMO) new equilibrium deposit rates that are uniform across banks and much closer to wholesale funding rates (close to SOFR). Obviously, the run scenario is bad but it's unlikely, in my opinion, that technology for moving deposits will advance faster than banks' ability to raise deposit rates. Nonetheless, we should worry about the run possibility. Even if runs don’t occur, the increase in competition for deposits will depress lending, investment and economic growth. Deposit beta – the change in bank deposit rates as policy rates change - is a key input into both banks' internal risk models and the Fed’s Stress Test models (the PPNR estimates). These deposit betas range from .40-.55 at all DFAST banks and are even lower at the G-SIBs. Should deposit betas increase to .75-.85 these banks would be required to hold materially more capital and a large literature shows increased stress test capital requirements are passed through to lower lending and less economic growth (see Shahhosseini (2022) or Berrospide & Edge (2024)). Bank deposits pay below market rates and are notoriously sticky. If competition suddenly forced banks to pay deposit rates 100 bps closer to SOFR, we would see bank ROE fall between 30-50% for the US G-SIBs and more for regional and smaller less diversified banks. Again, there is a large literature showing unexpected shocks to bank profits result in credit rationing and slower economic growth (for example see Chava & Purnanandam (2011), Repullo, & Suarez (2013), Gropp et. al. (2024)) In equilibrium, a move to close-to-perfect competition for deposits would result in less lending, higher bank capital ratios, higher credit spreads on bank loans and a small probability of a costly bank run as we transition from the current sticky deposit regime to a competitive wholesale market for deposits.