IMF Insider Predicts Trouble for US Banks in 2024
A financial analyst with close ties to the International Monetary Fund (IMF) has sounded a cautionary note regarding the stability of the US banking sector in the near future.
Desmond Lachman, a former Deputy Director at the IMF’s Policy Development and Review Department, has raised concerns about the potential challenges facing American banks in the coming year, as disclosed in reports from the Chinese state-run Xinhua.
Lachman has conveyed a worrying outlook, suggesting a high likelihood of encountering a renewed wave of regional bank crises during 2024. He emphasizes that such circumstances could significantly jeopardize the ongoing economic recovery.
As a senior fellow at the American Enterprise Institute (AEI), Lachman has shed light on the vulnerable position of regional banks. Around 18% of their loan portfolios are entangled with the distressed commercial real estate industry.
Highlighting concerning trends, Lachman points out that influential property investors like Brookfield and Blwackstone are beginning to relinquish their mortgage commitments. This trend might trigger defaults by commercial property owners, potentially inflicting severe repercussions on smaller and mid-size banks.
These warnings coincide with observed decreases in deposits held by US banks over the past year. Official data from the St. Louis Federal Reserve indicates a substantial decline of $359.32 billion in deposits between December 21, 2022, and December 20, 2023.
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A recent survey conducted by the Federal Reserve, encompassing insights from market professionals, academics, investment funds, and research firms, underscores prevailing apprehensions within the US banking industry. While acknowledging the sector’s apparent stabilization post the financial upheavals of 2022, respondents highlight two crucial factors hinting at the potential for another crisis.
Respondents point out that despite the sector’s seemingly restored stability, the risk of renewed deposit outflows persists due to substantial uninsured deposit amounts. Additionally, concerns linger regarding potential losses stemming from exposure to commercial real estate, especially among smaller and regional banks.
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.
