Digital financial innovation drives the development of the financial industry, offering new benefits to financial consumers. However, as demonstrated by the 2023 bank run involving Silicon Valley Bank, it also heightens the risk of digital bank runs. In exploring how to prevent bank runs while ensuring the efficiency of financial intermediation, this study examines a new banking system proposed in Europe, the CBDC next-level model: A central bank issues retail Central Bank Digital Currency (CBDC) to monopolize demand deposit-taking and supply these funds as pass-through funding to commercial banks. In turn, banks provide loans to private borrowers using these funds. This system removes barriers to entry in the loan market to allow for free competition among commercial banks, fintechs, and Big Tech companies, thereby introducing perfect competition. Rigorous theoretical analysis in this study shows that this novel system could eliminate bank runs while achieving socially optimal levels of financial intermediation. Nonetheless, this model also presents some limitations, such as the centralization of personal information by the central bank and the potential political influence over lending decisions.

Preface
Executive Summary

Chapter 1 Introduction

Chapter 2: The Trade-off Between Financial Innovation and Financial Stability
　Section 1 Mobile Banking and the Silicon Valley Bank Bank Run Incident
　Section 2 Online Deposit Brokering and the Risk of Collective Bank Runs

Chapter 3: Alternatives: Restructuring the Banking Industry with Retail CBDC
　Section 1 Existing Banking Systems
　Section 2 Narrow Banking Systems
　Section 3 Introduction of CBDC
　Section 4 CBDC + Pass-through Loans
　Section 5 CBDC-Based New Banking System

Chapter 4: Literature Review
　Section 1 The Relationship Between Competition and Liquidity Creation
　Section 2 Economies of Scale in the Banking Industry
　Section 3 The Relationship Between Competition and Financial Stability
　Section 4 CBDC, Resource Allocation, and Bank Runs

Chapter 5: Theoretical Analysis
　Section 1 Theoretical Model
　Section 2 Benchmark Analysis
　Section 3 Market Equilibrium
　Section 4 CBDC-Based New Banking System
　Section 5 Does It Eliminate Insolvency Risk?

Chapter 6: Policy Implications, Challenges, and Limitations
　Section 1 Summary and Implications
　Section 2 System Transition and Operational Approaches
　Section 3 Challenges and Limitations
　Section 4 National Deposit Bank

Chapter 7 Conclusion

References
ABSTRACT