186 other US banks are at risk of bankruptcy like Silicon Valley Bank.

Rising interest rates reduced the market value of assets in the US banking system by $2 trillion. Combined with a large number of unsecured deposits from some US banks. causing the bank to start having problems

The combined effects of unsecured leverage losses and increased credit portfolios including other factors As a result, Silicon Valley Bank (SVB) is in crisis, and a comparison of Silicon Valley Bank’s position shows that nearly 190 other banks are at risk of closure.

Although the bankruptcy of Silicon Valley Bank reminds us of the fragility of the traditional financial system, a recent analysis by the Economist also shows that a large number of banks are raising money on unsecured deposits.

“Only half of unsecured depositors want to withdraw money, nearly 190 banks are at risk of failing to approve withdrawals. and $300 billion in insurance deposits at risk.”

The monetary policy set by central banks can have a negative impact on long-term assets such as government bonds which can cause the bank to lose The report explains that a bank is considered insolvent if its assets market value (Value Mark to Market) after all unsecured depositors have been paid out. It is not enough to repay all the insurance deposits.

The data in the graph above shows the bank’s assets as of Q1 2022. The bank in the top right corner, next to SVB (with $218 billion in assets), has the most severe asset losses and has unsecured deposits implemented as much as possible

Rising interest rates reduced the market value of assets in the US banking system by $2 trillion. Combined with a large number of unsecured deposits from some US banks. causing the bank to start having problems The study concluded that

“Recent declines in bank asset values ​​significantly increase the vulnerability of the US banking system to uninsured depositors.”

As the federal government steps in to protect depositors of Silicon Valley Bank and Signature Bank, President Joe Biden has promised that taxpayers will not be affected.

However, on Twitter, it has been said with the same voice that “Everything you do or people mess with costs tax money!”

Source: Cointelegraph