03-21-2023, 08:39 AM
![[Image: 6cc7dad5-silicon-valley-bank-ap-140323-1.jpg]](https://media.freemalaysiatoday.com/wp-content/uploads/2023/03/6cc7dad5-silicon-valley-bank-ap-140323-1.jpg)
PETALING JAYA: If you think the recent market turmoil arising from the collapse of Silicon Valley Bank (SVB) and Signature Bank (SB) in the US was bad, just imagine another 190 US banks biting the dust under similar circumstances.
That’s exactly the scenario laid out by a new study released by Social Science Research Network (SSRN) last week.
The study found that 186 banks with a high level of uninsured debt or assets could be putting insured deposits at risk, and that these banks remain vulnerable to a run on deposits like SVB, SB, and Silvergate Bank.
While the US government insures bank deposits of up to US$250,000 (RM1.12 million), these at-risk banks have high numbers of uninsured depositors who the study claims are more likely to pull their funds for fear of losing them.
The banks also hold a significant amount of their assets in interest rate-sensitive financial instruments like government bonds, which are particularly vulnerable to interest rate hikes.
The study found that even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a risk of impairment to insured depositors, with a potential US$300 billion (RM1.35 trillion) of insured deposits at risk.
It stated that the US banking system market value of assets is US$2 trillion (RM8.97 trillion) lower than suggested by their book value of assets.
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