Banking Industry in Peril: Disturbing Projections and the Fragile State of American Banks
According to recent predictions from the US Federal Reserve (FRB), American banks are expected to face a severe crisis in light of the projected increase in interest rates.
Balaji, renowned for his prediction that Bitcoin would reach $1 million, shared an internal report from the Fed on the 5th of this month.
722 banks. That's from an internal Fed report on how many banks their rate hikes had destroyed.
We're just getting started.https://t.co/SBOGhiK9MD pic.twitter.com/RBMgxzypmm
— Balaji (@balajis) May 5, 2023
The report provided an analysis of the banking industry’s performance during the pandemic, highlighting the significant growth in bank deposits and securities payments. Notably, investments in securities, including US bonds, reached a staggering $6 trillion in the first quarter of 2022, reflecting substantial monetary commitments.
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Furthermore, the report revealed that unrealized losses resulting from the anticipated rise in interest rates exceeded 30% of capital (referred to as “sea 1”) by September 2022.
By the end of the third quarter of 2022, a total of 722 banks were grappling with unrealized losses surpassing 50% of their capital.
As interest rates continue to climb, banks are faced with challenging decisions due to the escalating unrealized losses, even though securities, such as US Treasury bonds, have traditionally served as sources of liquidity.
To illustrate the impact, the report cited the bankruptcy of SVB as a notable example.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
