Comment by jaycroft

Because now the bank has to pay interest to depositors of $150M instead of $100M, which means that they'll pay a lower, less competitive rate. So, in order to keep customers, banks are incentivized to lend out any and all spare cash for whatever yield that they can get, in order to give attractive rates to depositors. Losing customers though shouldn't really be a problem for the bank, after all, those customers did deposit "too much" money - once enough have left to seek higher yields elsewhere, there will be less cash on the sidelines, and so higher yields for the remaining customers. I suppose if your whole philosophy is "growth at any cost", and you're measuring growth not just by AUM but also by number of customers, you get excess risk taking and yield chasing.