Socio-Economics History Blog

Socio-Economics History Blog

Study Finds 186 Banks Vulnerable to SVB-Like Collapse

by mosesman

  • See also:
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    WSJ: Dozens of Banks May Have Risks Similar to Silicon Valley Bank, Economists Find
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  • Study Finds 186 Banks Vulnerable to SVB-Like Collapse
    by  FOXBusiness
    The study created a scenario where half of 186 banks’ depositors withdrew their funds
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    A new study says that, depending on certain market conditions, nearly 200 U.S. banks could be vulnerable to the same fate as Silicon Valley Bank (SVB). A recent Social Science Research Network study suggests that 186 American banks could fail if half of their depositors suddenly withdrew their funds. The researchers formulated a speculative scenario in which each bank experienced a run, and concluded that the FDIC would run out of money.
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    The study was published shortly after the collapse of SVB, the worst American financial institution failure since 2008. “Our calculations suggest these banks are certainly at a potential risk of a run, absent other government intervention or recapitalization,” the economists wrote.
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    “Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk,” the study’s abstract reads. “If uninsured deposit withdrawals cause even small fire sales, substantially more banks are at risk.”
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    The issue lies in the fact that the studied banks’ assets are in government bonds and mortgage backed securities, which were negatively affected by the Federal Reserve’s recent interest rate hikes.
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    read more.

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