Factors including losses, uninsured leverage and extensive lending led to the collapse of Silicon Valley Bank (SVB). Now, by comparing the situation of SVB with other players in this field, experts have claimed that close to 190 banks Active in the United States are also at potential risk of falling.
While the collapse of SVB is a reminder of the fragility of the traditional financial system, a recent analysis by economists shows that many other banks are also close to collapse. According to CoinTelegraph, their analysis states:
“Even if only half of uninsured depositors choose to withdraw their funds, approximately 190 banks are at potential risk of having their deposits reduced, with potentially $300 billion in deposits at risk.”
The report goes on to say that monetary policies implemented 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 explains that a bank is considered insolvent when the market value of its assets is insufficient to repay all insured deposits.
The chart above shows the assets of banks based on the bank reports published in the first quarter of 2022. The banks in the upper right corner have the heaviest losses and the largest amount of uninsured deposits, along with SVB (with $218 billion in assets).
In addition, recent interest rate hikes that have reduced the market value of the US banking system’s assets by $2 trillion, along with a large share of uninsured deposits in some US banks, threaten their stability.
As a summary of their study, the experts explain:
“The recent decline in the value of bank assets has significantly increased the vulnerability of the US banking system to insured depositors.”
