America’s economy is about to collapse! 186 banks will drown in just one step, Fed Reserve’s decision is overshadowing
186 more banks in America face the same risk as Silicon Valley.
The return on investment of these banks is already decreasing.
If even half of the depositors withdraw their money, then the risk will increase on 190 banks.
New Delhi. Cracks have started appearing in the world’s largest and strongest economy. In March itself, 4 big banks of America have drowned and the danger is increasing. Trusting the recent report, like the Silicon Valley Bank, 186 more banks are at risk of drowning (American Bank at Risk). Presently these banks are running on the mercy of the people. If the government does not take concrete steps soon and people start withdrawing their money, then the risk of sinking on these banks will also increase.
The Social Science Research Network study, in a report titled ‘Monitoring Tightening and US Bank Fragility in 2023’, said that 186 more banks in the US face the same risk as Silicon Valley. This type of risk has arisen due to increase in interest rates and increase in uninsured deposits. It has been said in the report that the return on investment of these banks is already decreasing. In such a situation, the entire onus has come on the depositors.
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Just one step, and…
The report says that the skepticism among uninsured depositors is continuously increasing. In such a situation, if even half of the depositors withdraw their money, then the danger on 190 banks will increase. Not only this, there is a risk on the amount of about 300 billion dollars i.e. 24 lakh crore rupees of uninsured depositors. If even half of this money is withdrawn, most of the banks will be drowned. The same happened with Silicon Valley Bank. The returns on his investments plummeted and depositors in a panic withdrew their money, causing the entire bank to collapse.
two big reasons for concern
The biggest concern for banks right now is the rising interest rate. The US central bank, the Federal Reserve, is rapidly raising interest rates to contain inflation. Due to this, the returns on the money of banks engaged in government securities and bonds have come down. This is affecting the liabilities of the banks and defaults are happening. In such a situation, the pressure on the customers to withdraw their money is also increasing. Caught in a similar situation, SVB sold its assets at a loss of about Rs 16,000 crore. As soon as this was known, there was a stampede among the customers and they started withdrawing their money. This has been the biggest reason for the sinking of Silicon Valley Bank.
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The last resort… the support of the government
The report has bluntly said that 186 banks are in full danger. If no escape route is given to these banks, then definitely a big crisis can come. The market cap of 10 percent of these banks is less than that of SVB. The losses faced by the banks are prompting uninsured depositors to withdraw money and if even half of these people withdraw their deposits from the bank, then they are sure to drown. Now the intervention of the government has become very important. If capital is not provided to these banks by the government, then the situation can turn from bad to worse.
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Tags: Bank fraud, Banking sector reforms, business news in hindi, economics, United States of America
FIRST PUBLISHED : March 22, 2023, 10:02 IST