The perfect combination of losses, uninsured leverage and an extensive loan portfolio, among other factors, led to the downfall of Silicon Valley Bank (SVB). Comparison of the SVB position with other players revealed that approximately 190 banks operating in the United States are at risk of a run-off.
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 at risk of withdrawing uninsured deposits. You read:
“Even if half of uninsured depositors decide to withdraw, nearly 190 banks are at risk of twice as much insured depositors, with $300 billion in insured deposits potentially at risk.”
Monetary policies set by central banks can hurt long-term assets such as government bonds and mortgages, causing losses for banks. The report shows that a bank is considered insolvent if the market value of its assets – once the uninsured depositors have been paid – is insufficient to pay off all the insured deposits.
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 percentage of deposits. uninsured. To market the assets in the market.
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 the stability of banks.
The study concluded that “recent declines in the value of bank assets 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, one user pointing to Biden revealed on Twitter that “everything you do or touch costs the taxpayer!”
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