More American banks were teetering on the brink of collapse this weekend as a leading US think-tank raised fears over the financial strength of almost 200 lenders.
The Bank of England, meanwhile, is preparing to lift the cost of borrowing for the 12th time in a row as it tries to tame double-digit inflation. This follows further rate increases in the US and Europe.
Experts at the Hoover Institution think-tank say the global surge in interest rates has caught banks on the hop and left many of them nursing huge losses on some of their investments.
Officials are also concerned about the speed of recent bank runs, fuelled by social media. Three of the four biggest bank failures in US history have occurred in the last two months.
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Hoover’s analysis found that if half of uninsured savers withdrew their cash, then 186 US banks with total assets of £240billion would be at ‘potential risk of impairment’. That means the banks in question would technically be in breach of regulators’ rules on capital.
If they became insolvent, the US government would have to guarantee savers’ money – leaving taxpayers on the hook – or find buyers for failed banks, as has happened recently.
‘There are several potentially insolvent banks lurking in the system,’ warned Amit Seru, finance professor at Stanford University and one of the Hoover report’s authors.
While most of the bank runs have been in the US, there are fears that panic could spread.
I keep reading of this figure from several sources but none of them list the alleged 200 banks that are in trouble. It would be very helpful if there was such a list…
You make a good point. On the other hand, maybe they don’t want the list published. The bank runs have already started and a list of the banks may cause a further run (and collapse) of the worst banks.