Beijing, 5 May (ZXS) -- Another US bank has collapsed. Due to the rupture of the capital chain, the First Republic Bank of the United States was recently closed and taken over, which is the third regional bank in the United States to have a crisis after the successive "thunder" of Silicon Valley Bank and Signature Bank in March.
In fact, many regional small and medium-sized U.S. banks face the same survival challenges as the three banks that have failed. According to US media reports, the study shows that nearly 190 banks in the United States are at risk of failure. According to reports, the Western Pacific United Bank in San Francisco has also seen a significant decline in market value recently and is considering selling. During early trading on May 5, local time, its stock price plummeted by more than 4%, and the American people worried that the bank would become the fourth American bank to fail in two months.
International rating agency Moody's has downgraded more than 10 U.S. regional banks, including the Bank of Hawaii. Moody's said that the pressure on banks to manage assets and liabilities is becoming more obvious, and the high stability of some banks' deposits is doubtful.
How will the crisis in the US banking industry evolve? JPMorgan CEO Jamie Dimon said in his annual letter to shareholders that the banking crisis triggered by the collapse of Silicon Valley banks is not over and will last for years. While the banking system is strong and sound, the recent turmoil surrounding the financial system is "another straw" for the economy toward recession.
Bill Ackerman, founder of Pershing Square Capital Management in the United States, said bluntly: "Banking is a game of confidence. At this rate, no regional bank survives bad news or bad data. As stock prices inevitably plummeted, deposits kept being withdrawn, and the next vulnerable bank began to falter. ”
"The U.S. banking crisis confirms our foreboding premonition in our previous outlook, necessitating a risk balance adjustment." Daleep Singh, chief global economist and head of global macroeconomic research at Prudential Fixed Income, said.
In his view, the banking sector amplifies the impact of the economic cycle more than any other sector, and its vulnerability could lead to a one-point drop in U.S. GDP growth this year, while also limiting policymakers' ability to focus on fighting inflation, especially given that the banking sector now faces far more than liquidity.
Dalip Singh noted that in the current situation, the strategy of maintaining a balance between managing the macroeconomy and policies to maintain financial stability is expected to be tested, and existing liquidity injection tools may not be sufficient to protect banks with flawed business models from the risk of further runs.
According to a recent paper published by the National Institute of Economic Research, the banking crisis, which began with the collapse of the Silicon Valley bank and now led to the collapse of the First Republican Bank, may be much worse than it first appeared. The researchers concluded that we are now at the beginning of what they call a "systemic banking crisis."
"The short-term problem for Silicon Valley banks is liquidity runs, and the long-term problem is inversion of balance sheets, maturity mismatches, and unfortunately banks across the United States." Chen Hongbin, chief economist of Pengyang Fund, said.
He believes that the most serious problem is the inversion and maturity mismatch of the entire European and American banks, resulting in a long-term liquidity run, which continues, and the US economy is also declining, which will lead to a lack of confidence in the future economy and a contraction of the entire financial system.
Zhang Ming, deputy director of the Institute of Finance of the Chinese Academy of Social Sciences, also believes that the source of the turmoil in the banking industry is the Fed's interest rate hike. It is unlikely that US inflation will fall rapidly in the short term, and it will be difficult to cut interest rates in the short term even if the Fed does not raise interest rates in the future. In other words, as a source of financial turmoil, US monetary policy will remain tight, and the current problems of US big banks are indeed not big, but the crisis of US small and medium-sized banks may not be over.
Zhang Ming pointed out that small and medium-sized banks in the United States are currently facing dual pressure on the asset side and the liability side. On the liability side, the current returns of U.S. money market funds are rising as the benchmark interest rate rises. For Americans, there is a strong incentive to withdraw their savings to buy money market funds.
From the asset side, this round of Fed interest rate hikes is very steep, coupled with the change of US office model after the epidemic, the current downward pressure on commercial real estate in the United States is great, while small and medium-sized banks in the United States hold 70% to 80% of commercial real estate loans.
"Deposits on the liability side are being lost, and non-performing assets are rising. Whether the small and medium-sized banking crisis in the United States is really over, it is really difficult to say. Zhang Ming said. (End)