June 5, 2023
Federal Reserve System

US Federal Reserve Building

©Global Look Press via ZUMA Press

Almost half of the 4,800 US banks are potentially bankrupt due to the depletion of their reserves. To this conclusion came panel of experts following a recent study.

The recent bankruptcies of Silicon Valley Bank, Signature Bank and First Republic Bank are just the tip of the iceberg, economists say. “Much of the US banking system is potentially insolvent,” said Professor Amit Seru of Stanford University.

According to the report, about 2,315 banks in the US currently have assets that are worth less than their liabilities. At the same time, the market value of these banks’ loan portfolios is $2 trillion below their stated book value.

However, it is noted that US regulators can contain the liquidity crisis faced by mid-tier banks by issuing temporary guarantees on all deposits. Nevertheless, this will not solve the problem of the largest solvency crisis, Seru is sure.

Amid the instability of the US banking system, almost half of Americans are concerned about the safety of their savings, according to a survey conducted by the consulting company Gallup. In March for a few days after the bankruptcy of Silicon Valley Bank (SVB) Depositors withdrew $98.4 billion from their accounts.

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