Hundreds of small and regional banks across the U.S. are feeling stressed.
“You could see some banks either failing or at least falling below their minimum capital requirements,” Christopher Wolfe, managing director and head of North American banks at Fitch Ratings, told CNBC.
Consulting firm Klaros Group analyzed about 4,000 U.S. banks and found that 282 banks face the dual threat of commercial real estate loans and potential losses associated with higher interest rates.
Most of these banks are smaller lenders with assets of less than $10 billion.
“Most of these banks are not insolvent or even close to insolvent. They’re just under stress,” Brian Graham, co-founder and partner of Klaros Group, told CNBC. “That means there will be fewer bank failures. But that doesn’t mean communities and customers aren’t being harmed by this stress.”
Graham pointed out that the impact on communities would likely come in more subtle ways than through closures or bankruptcies, but rather through banks’ decisions not to invest in things like new branches, technological innovations or new staff.
For individuals, the consequences of small bank failures are more indirect.
“There are no direct consequences if the insured deposit limits are fallen below, which are now quite high.” [at] $250,000,” Sheila Bair, former chairwoman of the US Federal Deposit Insurance Corp., told CNBC.
If a failing bank is insured by the FDIC, all depositors will be paid “up to at least $250,000 per depositor, per FDIC-insured bank, and per owner category.”
Watch them Video Learn about commercial real estate risk, the role of interest rates in unrealized losses, and what it will take to unburden banks – from regulation to mergers and acquisitions.
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2024-05-01 15:53:15
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