SVB and First Republic problems are not going away. Here’s why – and if you’re at risk.

The surprise takeover of a Silicon Valley bank by regulators was followed on March 10 by the Federal Reserve reassurances That all depositors – both insured and uninsured – will get their money back. But, despite this guarantee, unrest in the banking industry has only grown, resulting in an emergency Money infusion In another regional institution and a Historic acquisition A bank “too big to fail”.

The turmoil raises the specter of the 2008 global financial crisis, which sparked the Great Recession and led to a loss 8 million jobs And a housing crisis. The lessons of this painful chapter raise questions about whether current banking problems can spread and pose a risk to the US economy and individual bank deposits.

The word on everyone’s mind at the moment is ‘infection’: are the problems in SVB, [Credit Suisse]And others spread to the wider banking sector and led to a banking crisis similar to the 2008 crisis?

Another 190 banks are at risk of failing even if half of uninsured depositors withdraw their money, suggesting the Silicon Valley bank is not alone in facing classic “run on the bank” risks, according to New analysis From researchers at Stanford, Columbia, Northwestern, and the University of Southern California.

Here’s what you need to know about the ongoing banking turmoil and the risks it poses.

Why does the SVB failure still affect the banking industry?

In short, this is because other banks share similar risks with a Silicon Valley bank, though not all to the same degree.

SVB’s financial position has grown less steadily over the past year due in part to a series of Fed rate hikes. While the central bank aimed to tame the highest inflation rate in 40 years by raising interest rates, the measures had a secondary effect: the interest rate hike reduced the value of US government bonds, an investment typically held by banks including SVB.

When SVB needed to back up its financials earlier this month, it sold all of its available-for-sale securities – $21 billion in bonds. But due to the downturn in bond valuations, SVB took a $1.8 billion loss in this sale, to the dismay of depositors.

This led to a classic bank rush, as depositors scrambled to withdraw their money from the SVB – and two days after the bond sale was announced, the bank was shut down by regulators, who declared it was insolvent.

Now, depositors at other banks and financial experts are wondering if the same thing could happen in other institutions.

Could more banks fail?

Yes, according to the new report from researchers at Stanford, Columbia, Northwestern, and the University of Southern California.

Part of the problem is whether a bank has a high share of uninsured deposits, because depositors with more than $250,000 in funds — the FDIC’s minimum insurance — stand to lose that money if the institution fails. This can put banks with a high share of uninsured deposits at greater risk of bankruptcy, which in turn could lead to bankruptcy.

Sure enough, SVB had a disproportionate share of uninsured funds than other banks, as the researchers found that only 1% of banks had higher uninsured leverage. However, they added that uninsured deposit withdrawals could force more banks to sell their holdings in a “quick sale,” putting them at risk of bankruptcy.

They noted that “even if half of uninsured depositors decide to withdraw, approximately 190 banks are at potential risk of vulnerability to insured depositors, with $300 billion in insured deposits potentially at risk.”

The researchers did not reveal the names of the banks they identified as at risk, but noted that a large, unnamed bank with assets of more than $1 trillion could face bankruptcy issues if uninsured depositors withdraw funds.

How do Credit Suisse’s problems play a role in this?

Many of Credit Suisse’s problems were unique and unlike the weaknesses that brought down Silicon Valley and Signature Bank in the US, including high interest rates.

Credit Suisse has had a host of problems in recent years, including Bad bets on hedge fundsfrequent changes of its top management and a spying scandal to rival UPS, which it said Sunday You will buy Credit Suisse.

Analysts and financial leaders say the collateral is stronger since the 2008 global financial crisis and that banks around the world have plenty of cash on hand and support from central banks. But concerns about the risks to the deal, the losses to some investors and the decline in the market value of Credit Suisse may be renewed. Concerns about the health of banks.

How do I know if my bank – and my money – is in danger?

Banks’ operations are somewhat unpredictable, but experts recommend looking at a bank’s financial statements, including its share of uninsured deposits, to help gauge risk.

As mentioned, SVB had a fairly high percentage of uninsured deposits, a trait shared with some of the other regional banks, such as First Republic. This information can be found in the bank’s annual report by searching for the phrase “unsecured deposits”.

Another problem to look for is the so-called Texas ratio, according to DepositAccounts.com. This compares the total value of the loans at risk to the total value of the funds available to cover these loans. Six US banks and savings had a Texas ratio above 100% in the fourth quarter, according To S&P Equity – all relatively small banks, including the State Bank of Tampa in Kansas and Bank of Lafayette in Georgia.

Deposits are insured up to a maximum of $250,000 by the FDIC, so depositors who have money in excess of that amount in one account at one bank are at greater risk if their bank fails. There are several steps you can take reduce this riskthough, such as opening accounts in several banks.

– With Associated Press reporting.

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