186 US Banks at Risk of Collapse due to Increasing Interest Rates
According to a recent study conducted by economists, 186 US banks are at risk of collapsing due to the increasing interest rates and potential customer withdrawals. The study suggests that even insured depositors may face impairments if half of the uninsured depositors withdraw their funds rapidly from any of these 186 banks
The study assessed asset books and market value losses for several US banks amid the Federal Reserve’s rapid rate-hike campaign. Banks are straining to keep up as the value of these assets, such as Treasury notes and mortgage loans, declines. Many financial organisations could face disaster as a result of this predicament.
The study also examined the banks’ financing proportions, paying particular attention to money from uninsured depositors who had accounts worth more than $250,000. According to the data, even insured depositors might experience impairments if even half of these uninsured depositors withdrew their money quickly from any of these 186 American institutions. This is a ticking time bomb that has the potential to bring down the whole financial sector.
The Federal Deposit Insurance Corporation (FDIC) may need to step in in certain situations. Government-run FDIC offers depositor protection in the event of bank failure. But, even the FDIC might not have enough funds to safeguard every depositor if half of the uninsured depositors were to withdraw their money.The question is, will it be enough to prevent a catastrophic collapse of the banking system?
It is crucial to note that the study does not consider hedging strategies that may safeguard numerous banks against rising interest rates. These strategies involve financial instruments that protect against losses in value due to market fluctuations.
This study highlights the urgency of regular financial stability assessments and the importance of informed decisions by depositors when choosing a banking institution. The question remains — will we sit idly by, or will we take action to prevent a looming financial disaster?
submitted by /u/simranultimez