200 US banks are under risk: Study

By Al Mayadeen English
Source: Agencies
18 Mar 2023 00:30
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In "Monetary Tightening and U.S. Bank Fragility in 2023", researchers contended that "there are 186 banks with a negative insured deposit coverage ratio”.

A display shows most indicators down on the floor at the New York Stock Exchange in New York, Wednesday, March 15, 2023 (AP Photo/Seth Wenig)

According to recent studies, nearly 200 American banks may have financial complications that have not yet been revealed, suggesting that the banking crisis discovered a week ago in the largest economy in the world may be more severe than initially assessed to be.

In Monetary Tightening and U.S. Bank Fragility in 2023, researchers contended that "there are 186 banks with a negative insured deposit coverage ratio”.

“Our calculations suggest these banks are certainly at a potential risk of a run, absent other government intervention or recapitalization.” the researchers explain.

The study published last week showed that the banks with troubled balanced sheets had exposure to $300 billion worth of insured deposits.

“The losses to the deposit insurance fund would total approximately $10 billion,” the study reads. “If the FDIC shut these banks following a run, there would be no funds left for the remaining uninsured depositors. In other words, the decision [by depositors] to run would have been a rational one.”

America's 16th-largest bank has seen 60% of its shares plunging on Friday, making it the second largest bank failure in US history following the great market collapse of 2008, prompting regulators to seize its assets and halt trade on its stocks.

"Biden’s economic policies created the conditions that lead to SVB’s large losses and eventually the bank run," Republican Congressman Gosar said in a statement.

"SVB invested a large portion of its deposits in mortgage-backed securities and Treasury bonds. When interest rates were low, thanks in large part to President Trump, it seemed like a sound investment. However, when Bidenflation started to run out of control it forced the Fed to raise interest rates," he added.