February 25, 2024

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SVB analysis reveals that there are more than 186 US banks that are well positioned to fail

SVB analysis reveals that there are more than 186 US banks that are well positioned to fail

The perfect combination of losses, uninsured leverage, and a larger loan portfolio, among other factors, led to the downfall of Silicon Valley Bank (SVB). A comparison of the SVB’s position with other players revealed that approximately 190 banks operating in the United States are at potential risk to run.

While the collapse of the SVB came as a reminder of the fragility of the traditional financial system, it happened more recently analysis By economists showed that a large number of banks are only unsecured deposit withdrawals away from devastating collapse. is reading:

“Even if half of uninsured depositors decide to withdraw, approximately 190 banks are at potential risk of vulnerability to insured depositors, with $300 billion in insured deposits potentially at risk.”

Monetary policies set by central banks can have a negative impact on long-term assets such as government bonds and mortgages, which in turn can cause losses for banks. The report shows that a bank is considered insolvent if the market value of its assets – after paying all the uninsured depositors – is insufficient to pay off all the insured deposits.

The largest insolvent institutions in the event that all uninsured depositors run. Source: paper.ssrn.com

The data in the graph above represents assets based on bank call reports as of the first quarter of 2022. The banks in the upper right corner, along with SVB (with $218 billion in assets), have the riskiest asset losses and the largest uninsured deposits. operable. Market assets.

The recent rise in interest rates, which has led to a $2 trillion drop in the market value of the assets of the US banking system, in addition to a large share of uninsured deposits in some US banks, threatens its stability.

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The study concluded that “recent declines in bank asset values ​​have greatly increased the vulnerability of the US banking system to uninsured depositors.”

Related: BREAKING: SVB Financial Group files for Chapter 11 bankruptcy

While the federal government steps in to protect depositors at SVB and Signature Bank, President Joe Biden has asserted that there is no impact on citizens paying taxes.

However, many pointed to Biden on Twitter that “Everything you do or touch costs the taxpayer!”