A study finds that 186 US banks are experiencing the same vulnerabilities as Silicon Valley Bank (SVB), whose failure caused a storm in the banking system.
Is the fall of Silicon Valley Bank an isolated case or the first of a long list? According to a study by the Social Science Research Network, 186 US banks are at risk of bankruptcy due to rising interest rates and a high proportion of uninsured deposits.
If half of uninsured savers quickly withdraw their money from these 186 banks, even insured savers could face write-offs because banks would not have enough assets to ensure the integrity of all savers, according to the study.
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However, the specialist site Business Today notes “it is important to note that the study does not take into account coverage, which can protect many banks from rising interest rates”.
For the New York Post, the problem stems from the fact that “these banks hold a large portion of their assets in financial instruments that are sensitive to interest rates.” “The value of old low-interest investments fell sharply as the Federal Reserve raised interest rates over the past year.”
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The study by the Social Science Research Network shows that the 190 banks weakened by the SVB’s bankruptcy are at potential risk of impairment for insured depositors, with $300 billion in insured deposits potentially at risk. The study authors also found an estimated $2 trillion loss in the market value of these banks.
As a reminder, when SVB, a bank specializing in start-ups, announced its difficulties and presented a plan to raise $500 billion from Wall Street, its customers rushed to withdraw their money, fearing that the bank would not run out of liquidity. A reflex that led to the bankruptcy of the California bank.
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