In a recent Gallup poll conducted across the United States in April, 48% of respondents expressed concern about their money in the bank, with almost 20% indicating they were “very concerned.” The poll was conducted after the collapse of Silicon Valley Bank and Signature Bank but before the failure of First Republic Bank in late April. According to Gallup, this level of worry is on par with the last bank-induced financial crisis in 2008, when financial institutions previously believed to be “too big to fail” collapsed.
Experts at the Hoover Institution think tank suggest that if half of all uninsured savers withdrew their cash, 186 American banks would be at risk of impairment. These banks have total assets of $300 billion but represent less than 5% of the estimated 4,135 FDIC (Federal Deposit Insurance Corporation) insured commercial banks in the United States.
Additionally, California-based PacWest, Arizona’s Western Alliance, and Memphis-based First Horizon reportedly hang in the balance following a share price slump last week. A more concerning report from the UK’s Telegraph earlier this month suggested that half of the banks in America could be insolvent. The report cited research published in April by Stanford University banking expert Amit Seru, who estimated that more than 2,315 U.S. banks are currently sitting on assets worth less than their liabilities.
“The U.S. banking system’s market value of assets is $2.2 trillion lower than suggested by their book value of assets accounting for loan portfolios held to maturity,” Seru said. This gap is due to the banks’ underestimation of the risk of loan defaults and represents a significant threat to the stability of the banking system.
The current public opinion of banks appears to be dwindling as the industry struggles to contain the collapse of several high-profile financial institutions in recent months. While these concerns are not yet at crisis levels, they do suggest a lack of confidence in the banking system. It remains to be seen what steps regulators will take to address these issues and restore public faith in the stability of financial institutions.
