The United States continues to be shrouded in the shadow of a recurring banking crisis, as financial consulting firm Klaros Group revealed in a report this week that 282 out of 4,000 American financial institutions are facing the pressure of closure.
In a high-interest rate environment, nearly 300 banks are facing the pressure of closure.
The US banking industry is facing unrealized losses of $700 billion to $1 trillion.
Powell: The situation of bank closures caused by bad debts in commercial real estate is “controllable”.
At the end of April, Republic First Bank in Pennsylvania was ordered to close and was taken over by the Federal Deposit Insurance Corporation (FDIC), becoming the first US bank to close in 2024.
This brings to mind the wave of bank closures started by Silicon Valley Bank in March last year, which had a global impact on the financial and cryptocurrency markets. This year, due to the surge in bad debts from commercial real estate loans and the Federal Reserve’s continued maintenance of high interest rates, discussions about the recurrence of a banking crisis have been rampant.
According to CNBC, financial consulting firm Klaros Group stated in a report on Wednesday that it found 282 out of 4,000 American financial institutions are facing the pressure of closure.
Since the outbreak of the Covid-19 pandemic, the US economy has faced significant challenges, including massive debt, continuous inversion of US bond yields (i.e., short-term interest rates higher than long-term rates, a key indicator of economic recession), setting a record for the longest period in history, the Federal Reserve maintaining the federal funds rate at its highest level in 23 years in order to combat inflation, and the worsening of bad debts from commercial real estate loans, which has posed a threat to the survival of hundreds of small and regional banks in the US.
Christopher Wolfe, Managing Director and Head of North American Banking at Fitch Group, one of the world’s three major credit rating agencies, also issued a warning.
Brian Graham, Co-Founder and Partner of Klaros Group, also commented in an article for American Banker, suggesting that regulators adjust bank supervision and capital rules to better reflect reality.
It is worth noting that Federal Reserve Chairman Powell also admitted in early April that the increase in non-performing loans in commercial real estate could lead to the closure of some banks, but he believed that this would not pose a risk to the entire system and that the overall situation is still “controllable.”
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