About 190 banks could fail if even half of their uninsured depositors withdraw their money, a new study finds.
The tumult is raising the specter of the 2008 global financial crisis, which sparked the Great Recession and led to the loss ofand a housing crisis. The lessons from that painful chapter are prompting questions about whether the current banking problems could spread and pose a risk to the U.S. economy and to individual consumers' banking deposits.
Another 190 banks are in danger of failure even if half their uninsured depositors withdraw their funds, indicating that Silicon Valley Bank isn't alone in facing risks from a classic"run on the bank," according to aHere's what to know about the ongoing banking turmoil and the risks it poses.In a nutshell, it's because other banks share similar risks with Silicon Valley Bank, although not all to the same extent.
When SVB needed to shore up its financials earlier this month, it sold all of its available-for-sale securities — $21 billion in bonds. But because of the decline in bond valuations, SVB took a $1.8 billion loss on that sale, spooking depositors. Part of the issue is whether a bank has a high share of uninsured deposits, because depositors with funds above $250,000 — the threshold for FDIC insurance — stand to lose that money if the institution fails. That could put banks with a high share of uninsured deposits at a higher risk for a bank run, which in turn could lead to insolvency.
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