A study reveals that 186 American banks are experiencing the same fragilities as the Sillicon Valley Bank (SVB), whose bankruptcy caused a storm on 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 failure due to rising interest rates and a high proportion of uninsured deposits.
According the studyif half of uninsured depositors quickly withdraw their funds from these 186 banks, even insured depositors might face write-downs because banks would not have enough assets to ensure the integrity of all depositors.
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However, the specialized site, Business Todaynotes “that it is important to note that the research does not take into account hedging, which can protect many banks once morest rising interest rates”.
For the New-York Post, the problem stems from the fact that “these banks hold a significant portion of their assets in interest-rate sensitive financial instruments”. “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 Social Science Research Network study finds that the 190 banks weakened by the SVB bankruptcy are at potential risk of impairment for insured depositors, with potentially $300 billion in insured deposits at risk. The authors of the study also found an estimated loss of $2 trillion 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 does not run out of liquidity. A reflex that led to the bankruptcy of the Californian bank.
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