A recent study by four American academics warns of the critical fragility of at least 186 banks that would collapse under a bank run by their customers. In view of the operating model of the American banks that have been studied, 186 of them have flaws similar to those of Silicon Valley Bank, thus putting more than 300 billion dollars at risk.
Silicon Valley Bank, the beginning of a long domino effect?
A recent study conducted by 4 American academics alert on the critical fragility of at least 186 banks which would bend under a bank run of their customers. A bank run, which we can translate as a rush on deposits, is defined by a general panic movement leading a bank’s customers to withdraw all their funds simultaneously.
A test feared by all banks, the money of their customers being most of the time invested. It is moreover this dreaded panic movement which led Silicon Valley Bank, Silvergate Bank and Signature Bank to the rout.
Thus, by studying the operating model of American banks, the academics note that at least 186 banks (the names of the establishments concerned are not mentioned) have faults similar to Silicon Valley Bank. It would thus be no less than 300 billion dollars that would be in danger :
“Even if only half of uninsured depositors decide to withdraw, nearly 190 banks are at potential risk of loss of value to insured depositors, with potentially $300 billion of insured deposits at risk. »
By “uninsured”, the study refers here protection granted by the Federal Deposit Insurance Corporation (FDIC), an independent agency of the United States government responsible for guarantee bank deposits up to $250,000.
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Furthermore, note that a bank run occurs when customers no longer have confidence in their bank, often following revelations about the management of their capital. That’s what happened with Silicon Valley Bank, whose shares were significantly devalued compared to their initial value. Due in particular to the rate increases decided by the FED:
“During the Federal Reserve’s rapid interest rate hike, economists have rated individual US banks. They assessed asset books and market value losses. Assets such as treasury bills and mortgages can lose value. This happens when new bonds offer higher rates. »
Note however, as the study itself mentions, that it does not take into account a possible hedging strategy in the event of a change in interest rates. Still, it remains to be seen how many banks would manage to keep their heads above water if their customers were to withdraw their funds simultaneously, in the United States as elsewhere.
Anyway, while the Fed recently printed $300 billion to save the banking systemPresident Joe Biden assured that taxpayers were out of danger.
👉 On the same subject – The FED prints 300 billion dollars, Bitcoin (BTC) on the rise
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