kytphine
2023-03-26

More than 186 US banks well-positioned for collapse, SVB analysis reveals

Rising interest rates, which brought down the U.S. banking system’s asset market value by $2 trillion, combined with a large share of uninsured deposits at some U.S. banks, threaten banks’ stability.

The perfect mix of losses, uninsured leverage and an extensive loan portfolio, among other factors, resulted in the fall of Silicon Valley Bank (SVB). Comparing SVB’s situation with other players revealed that nearly 190 banks operating in the United States are potentially at risk of a run.

While SVB’s collapse came as a reminder of the fragility of the traditional financial system, a recent analysis by economists showed that a large number of banks are at risk from uninsured deposit withdrawals. It read:

“Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk.”

Monetary policies penned down by central banks can hurt long-term assets such as government bonds and mortgages, creating losses for banks. The report explains that a bank is considered insolvent if the mark-to-market value of its assets — once uninsured depositors are paid — is insufficient to repay all insured deposits.

The data in the above graph represents the assets based on bank call reports as of Q1, 2022. Banks in the top right corner, alongside SVB (with assets of $218 billion), have the most severe asset losses and the largest percentage of uninsured deposits to mark-to-market assets.

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The recent rise in interest rates, which brought down the U.S. banking system’s asset market value by $2 trillion, combined with a large share of uninsured deposits at some U.S. banks, threatens banks’ stability.

“Recent declines in bank asset values significantly increased the fragility of the US banking system to uninsured depositors runs,” the study concluded.

source: https://cointelegraph.com/news/more-186-us-banks-well-positioned-for-collapse-svb-analysis-reveals

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Comments

  • lowmy
    2023-03-27
    lowmy
    I guess Fed is caught between a rock and a hard place. inflation vs recession. Both equally bad
  • bobotrader
    2023-03-27
    bobotrader
    nice thanks for sharing
  • YiCheng0301
    2023-03-27
    YiCheng0301
    fed will prevent this
  • Bendemeer
    2023-03-27
    Bendemeer
    banks free money
  • keithfong
    2023-03-27
    keithfong
    Thanks for sharing
  • Wolfenstein118
    2023-03-27
    Wolfenstein118
    Thx for sharing
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