The bankruptcies of Silicon Valley Bank, Signature Bank and First Republic Bank and the recent fall in PacWest shares are just the tip of the iceberg, with more than half of US lenders suffering from the liquidity crisis.
Nearly half of the 4,800 US banks are potentially insolvent because their capital reserves have run out, says a group of banking experts, cited by The Telegraph.
The failures of Silicon Valley Bank, Signature Bank and First Republic Bank are just the tip of the iceberg, and more than half of US lenders they are already underwater, says Professor Amit Seru, a banking expert at Stanford University. “Much of the US banking system is potentially insolvent,” he says.
A report from the Hoover Institution by Professor Seru and a group of banking experts has shown that about 2,315 banks in the US currently have assets worth less than their liabilitieswhile the market value of the loan portfolios of these lenders is $2 trillion lower than the stated book value.
At the same time, in the opinion of this expert, US regulators can contain the liquidity crisis faced by midsize lenders, by guarantee all deposits temporarily. However this would not address the biggest solvency crisis.
- This Thursday, the shares of the PacWest bank, based in California, registered a fall in their shares of 60% amid the turmoil in the US banking sector.
- According to a survey carried out by the Gallup consultancy, in the midst of this instability in the US banking system, practically half of Americans are concerned about the safety of their savings deposited in banks.
- Thus, 48% of American adults say they are worried about their money; 19% said they were “very” worried, while 29% of those surveyed said they were “moderately” worried.