More than $300 billion of uninsured deposits could be at risk, the study says.
Amid the failure of Silicon Valley Bank (SVB), at least 186 other banks in the US could be exposed to similar risks, according to a study published this week in the Social Science Research Network.
Economists discussed how the Federal Reserve’s rate hikes have affected bank assets and their implications for financial stability. Thus, even if only half of uninsured depositors decide to withdraw, 186 banks are at risk, “with 300,000 million dollars of uninsured deposits potentially at risk”, reads the text.
The study also points out that the market value of the assets of the US banking system is two trillion dollars below its book value. The value of such assets has fallen by an average of 10 %and the 5% of banks that have suffered the most serious losses record a decline in 20 %.
“Taken together, these calculations suggest that recent declines in bank asset values have very significantly increased the fragility of the US banking system to uninsured deposit withdrawals,” the research authors concluded.
Last Friday, Silicon Valley Bank (SVB) starred in the largest bank failure in the US since the 2008 global financial crisis. The country’s 16th largest bank collapsed after depositors withdrew their money, as concerns spread over the bank’s crisis.
Two days later, regulators closed Signature Bank due to systemic risks and in order to avoid contagion in the sector.