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.
The stock market has felt the effects of bank failures and other recent economic incidents. Willie Delwiche, founder and strategist at Hi Mount Research joined LiveNOW from FOX's Josh Breslow to explain what happened and why.could be vulnerable to the same fate as Silicon Valley Bank .suggests that 186 American banks could fail if half of their depositors suddenly withdrew their funds.
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. General views of the SVB, Silicon Valley Bank branch on March 17, 2023 in Beverly Hills, California. "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.
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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