FAU Expert: These Banks Are at Higher Risk of a Depositor Run
With many banks having exposure to losses from commercial real estate and unrealized securities losses, more banks are at an increased risk of having a liquidity crisis caused from withdrawals by large uninsured depositors, according to an analysis from a finance expert at Florida Atlantic University
With many banks having exposure to losses from commercial real estate and unrealized securities losses, more banks are at an increased risk of having a liquidity crisis caused from withdrawals by large uninsured depositors, according to an analysis from a finance expert at Florida Atlantic University.
Based on first quarter 2024 regulatory data, 94 out of 1,028 banks with more than $1 billion in assets reported a 50% or higher ratio of uninsured deposits to total deposits, according to the Liquidity Risk from Exposures to Uninsured Deposits index. Seven of the 33 banks with more than $100 billion in assets are above the threshold. The Bank of New York Mellon has a 100% ratio of uninsured deposits, followed by State Street Bank, 92.6%; Northern Trust, 73.9%; Citibank, 72.5%; HSBC Bank, 69.8%; J.P Morgan Chase, 51.7% and U.S. Bank, 50.4%.
“The first bank failure of the year, Republic First Bank in Pennsylvania, was number 87 on the previous quarter’s list with a 51.5% ratio,” said Rebel A. Cole, Ph.D., Lynn Eminent Scholar Chaired Professor of Finance in the College of Business. “All of the banks on this list are at a serious risk of a run by uninsured depositors should they exhibit any weakness from commercial real estate exposures or unrealized losses on securities.”
The index, a part of the Banking Initiative at Florida Atlantic University, tracks 1,028 with more than $1 billion in total assets to calculate the ratio of uninsured deposits to total deposits using regulatory data. Banks that report a ratio greater than 50% are at an elevated risk of a run by uninsured depositors.
Three of the four largest bank failures in recent U.S. history occurred in 2023. They were precipitated by the rapid withdrawals of uninsured deposits following adverse news about the banks’ risks to exposure. With growing concerns about unrealized losses on investment securities and commercial real estate loans, the risk of yet another depositor run on banks grows each day.
-FAU-
Latest News Desk
- Master Copper Regulator Discovery May Offer Alzheimer's CluesA groundbreaking study by FAU researchers using a tiny roundworm, links the worm gene swip-10 to copper regulation, which could pave the way for new treatments for neurodegenerative disorders.
- FAU Survey: Port Everglades Firms Signal Optimistic Economic GrowthThe Port Everglades business ecosystem is gearing up for more hiring and economic growth in the year ahead, according to a survey from a supply chain expert at Florida Atlantic University.
- FAU Interim Vice President for Research Named Fulbright SpecialistGregg Fields, Ph.D., was selected by the United States Department of State's Bureau of Educational and Cultural Affairs for his expertise and contributions in disease discovery and treatment.
- Hot Streets, Historic Bias: Impacts on Walking in Older U.S. AdultsFAU researchers explored the impacts of historic discriminatory redlining, summer heat and the effects on walking behavior in older adults from marginalized communities nationwide.
- What's Really 'Fueling' Harmful Algae in Florida's Lake Okeechobee?FAU Harbor Branch researchers have conducted the first comprehensive sampling of the Lake Okeechobee Waterway and its estuaries. Findings mark a groundbreaking step in preserving this crucial ecosystem.
- FAU to Host 'The Constitution Today'FAU's Dorothy F. Schmidt College of Arts and Letters presents "The Constitution Today" on Tuesday, Sept. 17 at 2 p.m. in the Friedberg Auditorium.