FDIC reports $517 billion in losses for banks, with 63 banks faces collapse. Is Bitcoin price on bring of massive rise due to bank crisis?
Federal Deposit Insurance Corporation (FDIC) reported $517 billion in unrealized losses in the US banking system.
FDIC says 63 banks are at risk of insolvency sparking concerns about the stability of the US economy and financial sector.
The ISM Manufacturing PMI, which came in at 48.7 below forecasts of 49.6, pointed to a bigger-than-anticipated contraction in manufacturing.
Bitcoin price surpassed $70,000 as weaker manufacturing data increases the likelihood of interest rate cuts by the U.S. Federal Reserve.
FDIC Reports 63 Banks on Brink of Insolvency
The higher interest rates and delays in rate cuts have caused banks and businesses in the U.S. to remain under extreme pressure. Also, the Federal Reserve Board ended the Bank Term Funding Program (FTFP) on March 11, causing banks, especially regional banks, to face heightened risk.
FDIC said the US banking system is at high risk of insolvency as 63 banks have $517 billion in unrealized losses in Q1 2024.
It happened amid rising funding costs, lower asset yields, and the impact of higher mortgage rates. The rising concerns can shake the stability of the financial sector and the broader economy.
“Unrealized losses on available-for-sale and held-to-maturity securities soared by $39 billion to $517 billion in the first quarter.
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The surge was driven by higher unrealized losses on residential mortgage-backed securities, a result of rising mortgage rates in the first quarter,” the FDIC reported.
This marks the ninth consecutive quarter of unusually high unrealized losses since the U.S. Federal Reserve started raising interest rates in 2022.
Unrealized losses on the rise among the U.S. banks
Banks’ unrealized losses have increased significantly, reaching $517 billion. These losses stem primarily from their holdings in residential mortgage-backed securities.
When interest rates rise, the value of these securities falls. While these losses are realized once the securities are sold, they can become a significant burden if banks need to raise cash quickly.
This marks the ninth consecutive quarter of high unrealized losses, coinciding with the Federal Reserve’s interest rate hikes that began in early 2022.
Increased number of problem banks in the U.S.
The FDIC also reported a rise in the number of banks on its Problem Bank List. These banks are at risk of insolvency due to various financial weaknesses.
However, the FDIC emphasizes that the number of problem banks remains within the historical range observed during non-crisis periods.
Federal agency assures that the US banking system isn’t in immediate danger. However, it acknowledges ongoing challenges posed by inflation, volatile stock markets, and geopolitical tensions.
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These factors could impact banks’ ability to lend, generate profits, and maintain sufficient liquidity.
Additionally, specific loan portfolios, such as those for office properties and credit cards, require close monitoring due to potential deterioration.
The FDIC will continue to supervise these issues along with funding pressures and shrinking profit margins.
source: coingape.com/fdic-says-63-banks-faces-collapse-bitcoin-price-to-fall-or-rise/
finbold.com/u-s-banks-on-brink-of-collapse-517-billion-losses-threaten-63-banks/
