Amid the Silicon Valley Bank failure, at least 186 banks may face similar problems. American economists shared this view.
The scientists’ work published on the Social Science Research Network portal was shared by The Wall Street Journal. Economists from the University of Southern California, Northwestern University, Columbia University School of Business and Stanford University contributed to the paper.
Specialists calculated that after the Fed rate hike, bank assets fell by an average of 10%, and the 5% of banks that suffered more than others, by 20%. Right now, the market value of the assets of the US banking system is $2.2 trillion less than the book value.
The researchers studied the share of bank financing of uninsured depositors. Federal deposit insurance in the US covers deposits up to $250,000. Economists estimate that if half of uninsured depositors choose to withdraw their money, at least 186 banks and $300 billion of insured deposits will be at risk.
Last week, venture capital funds recommended startups pull funds from Silicon Valley Bank due to concerns about the bank’s financial stability. This led to the fall in the shares of the 16th largest bank in the US and its subsequent bankruptcy.
The collapse of the SVB is already affecting other financial institutions around the world. This week, Swiss Credit Suisse faced a record drop in the value of stocks, so it could be sucked up.
According to Business Insider, JPMorgan believes that Credit Suisse’s problems are just the “tip of the iceberg,” and that the crisis will affect the entire banking industry in the future.
Photo: Unsplash
Author:
Ahmed Sadulayev
Source: RB
I am a professional journalist and content creator with extensive experience writing for news websites. I currently work as an author at Gadget Onus, where I specialize in covering hot news topics. My written pieces have been published on some of the biggest media outlets around the world, including The Guardian and BBC News.
