A recent study by economists has revealed a chilling reality: 186 US banks are facing a potentially devastating risk due to issues similar to those that caused the collapse of Silicon Valley Bank.
With interest rates on the rise, many banks are finding their assets diminished and their futures uncertain.
Asset Books and Market Value Losses: A Recipe for Disaster
The study evaluated individual US banks during the Federal Reserve’s swift rate-hike campaign, assessing asset books and market value losses. These assets – including Treasury notes and mortgage loans – are decreasing in value, and banks are struggling to keep up. This could be the beginning of the end for many financial institutions.
Funding Percentages: A Ticking Time Bomb
The study also analyzed the banks’ funding percentages, with a focus on funding derived from uninsured depositors, those with accounts holding over $250,000.
The findings suggest that if even half of these uninsured depositors were to withdraw their funds rapidly from any of these 186 US banks, even insured depositors might face impairments.
This is a ticking time bomb that could spell disaster for the entire banking industry.
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