BREAKING NEWS! Study Shows That About 186 American Banks At Risk Of Collapsing, Similar To SVB, Silvergate Capital and Signature Bank Sagas!

A new study published by financial and banking experts from the University of Southern California, Northwestern University - Kellogg School of Management, Columbia University - Columbia Business School and Stanford University warns that more than 186 American banks at risk of collapsing rapidly, similar to SVB, Silvergate Capital and Signature Bank sagas!
 


The experts said that these 200 US banks are vulnerable to the same factors that lead to Silicon Valley Bank collapse last week, as a series of significant financial wobbles warn of a 2008-style meltdown.
 
The experts warned that there are 186 banks across the US that could fail if half of their depositors were to withdraw their funds quickly.
 
With many Americans already incensed that the Biden administration and the Democrats are using tax payers monies to bai out some of these mismanaged banking and capital companies along with the fact that the Democrats are behind the plan to arrest a former president of the United States ie President Donald Trump, they are many who are staging calls for bank withdrawals this week.
 
Although the US government insures bank deposits of up to $250,000, these at-risk banks have high numbers of uninsured depositors who the study claims are more likely to pull their funds for fear of losing them.
 
The banks also hold a significant amount of their assets in interest rate-sensitive financial instruments like government bonds, which are particularly vulnerable to interest rate hikes.
 
The experts from the study said,” We analyze U.S. banks’ asset exposure to a recent rise in the interest rates with implications for financial stability. The U.S. banking system’s market value of assets is $2 trillion lower than suggested by their book value of assets accounting for loan portfolios held to maturity. Marked-to-market bank assets have declined by an average of 10% across all the banks, with the bottom 5th percentile experiencing a decline of 20%. We illustrate that uninsured leverage (i.e., Uninsured Debt/Assets) is the key to understanding whether these losses would lead to some banks in the U.S. becoming insolvent-- unlike insured depositors, uninsured depositors stand to lose a part of their deposits if the bank fails, potentially giving them incentives to run.”
 
The experts added that the recently failed Silicon Valley Bank (SVB)as a case study is illustrative. 10 percent of banks have larger unrecognized losses than those at SVB. Nor was SVB the worst capitalized bank, with 10 percent of banks having lower capitalization than SVB. On the other hand, SVB had a disproportional share of uninsured funding: only 1 percent of banks had higher uninsured leverage. Combined, losses and uninsured leverage provide incentives for an SVB uninsured depositor run.
 
The experts added, “We compute similar incentives for the sample of all U.S. banks. Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk. If uninsured deposit withdrawals cause even small fire sales, substantially more banks are at risk. Overall, these calculations suggest that recent declines in bank asset values very significantly increased the fragility o f the US banking system to uninsured depositor runs.” The
 
The study findings were published on a preprint server: Social Science Research Network.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4387676
 
Understanding the SVB Collapse: A Comprehensive Breakdown
 
The Appeal of SVB Among Tech Founders
SVB, a popular banking choice for tech enthusiasts, found itself in the spotlight as its Manhattan branch experienced a surge of tech founders attempting to withdraw their funds. For these customers, sums like $250,000 were considered insignificant. Although SVB was not the most undercapitalized bank, it ranked in the top one per cent for uninsured funding.
 
The Consequences of SVB's Investment Strategy
The California-based bank invested heavily in long-term government bonds, which were considered ultra-safe but lost value due to interest rate hikes. To satisfy customer withdrawal requests, SVB had to sell some bonds at a loss, leading to a nearly $2 billion deficit. The announcement of this loss, along with a plan to raise an additional $500,000 million from Wall Street, fueled concerns about the bank's solvency and triggered a bank run.
 
The Role of Large Deposits in Instigating Panic
The size of SVB customers' deposits provided a strong incentive for them to withdraw their funds, as they had more at stake than clients at other banks with similar investment strategies. A study warned that 186 banks were in a comparably precarious position, putting approximately $300 billion of insured deposits at risk.
 
Calls for Full Insurance of Bank Deposits
High-profile investors like billionaire hedge fund manager Bill Ackman called for full insurance of all bank deposits. However, given the vast sum of deposits held in the United States, insuring all of them would be an immense undertaking.
 
The Aftermath: Bank Collapses and Government Intervention
The US banking system experienced the collapse of three major banks: Silvergate Capital, SVB, and Signature Bank. In response to the turmoil, the US government decided to waive the $250,000 insurance limit for both SVB and Signature Bank, assuring that all customers would receive their money. However, the question of how to fund the insurance for trillions of dollars in US bank accounts remains unanswered. The Biden administration is most likely to use tax payer’s monies for these despite claiming that there will be no bailouts!
 
First Republic Bank's Close Call
San Francisco-based First Republic Bank narrowly avoided collapse, thanks to a last-minute liquidity injection. Eleven banks reportedly deposited $30 billion to help the struggling institution.
 
Global Implications: Credit Suisse's Precarious Position
Switzerland's Credit Suisse, the world's seventh-largest investment bank, also faced difficulties as it was forced to sell bonds at a loss. Confidence in the bank dwindled, with its largest shareholder, the Saudi National Bank, refusing to deposit more funds due to fear of collapse. In response, Credit Suisse secured a lifeline from the Swiss National Bank and latest news have indicated a takeover bid by USB bank.
 
Volatile Markets Ahead
The next few weeks pold see the American and Global financial markets extremely volatile with an economic crisis in sight that will see many corporations and conglomerates collapse especially those in tech, property, banking and financial related industries.
 
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