Hundreds of US banks are eager to join SVB
..in the afterlife
A week ago, Circle’S stablecoin USD Coin (USDC) suddenly became unstable. Circle had stored part of the token’s collateral with the American Silicon Valley Bank (SVB). This bank ran into financial problems, after which a small chain reaction arose in other banks. Really big ‘contamination’ of other banks is still fairly absent, but there appear to be more banks with problems.
According to a study by Columbia University and Stanford University, 186 other US banks are on the verge of collapse. On average, the assets that all examined banks have on the balance sheet decreased by 10%. That may not sound like much, but banks have to comply with heavy regulations and because they have money from customers, such a decline in value can be a big risk. In the 5% most vulnerable banks, assets have already fallen by an average of 20%.
The researchers also compare the situation at these banks with that of the now bankrupt SVB. It doesn’t look good; 10% of the banks surveyed make more losses on their assets than SVB. Also, 10% of banks have less borrowed money at their disposal than SVB. Thus, these companies need to sell assets faster to maintain enough capital to repay customers.
In order to jeopardize the security of these banks, ‘only’ half of the customers have to withdraw their money. If this forces banks to sell their assets, many more banks are at serious risk, for example, it could cause a chain reaction in financial markets or cause consumers to lose confidence in banks. Whether there are also big names in the list of vulnerable banks is not known.
Unfortunately, the vulnerability of the banking sector is not limited to the US, for example at Crédit Suisse the problems are also great. This company now receives support from the Swiss central bank. But Bitcoin (BTC) and other cryptocurrencies rose during these troubles over the past few weeks. After all, the young asset class is, in theory, an alternative to the current financial system.
Nevertheless, the top woman of Crédit Suisse does not see crypto as a danger to the banking sector. She noted that the amount of outstanding bitcoins is limited, but there seems to be an infinite supply of cryptocurrencies.
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