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
- Data Analysis: Banks at Risk Despite Declining Interest RatesBanks across the U.S are facing increased pressure from exposures to unrealized losses and commercial real estate despite a slight decline in interest rates, according to screeners from the Banking Initiative.
- Bridging Oceans: U.S.-Japan Method to Flood Risk, Climate ResilienceA joint project funded by the NSF and JST brings together researchers from FAU, Lehigh University and Japanese institutions to develop a human-centered flood risk management framework.
- Lewis S. Nelson, M.D., Named Dean of FAU Schmidt College of MedicineFlorida Atlantic University has named Lewis S. Nelson, M.D., as the new dean of the Charles E. Schmidt College of Medicine.
- FAU Harbor Branch Announces 2025 Ocean Science Lecture SeriesFlorida Atlantic University's Harbor Branch Oceanographic Institute announced the lineup for its annual "John & Barbara Ferrera Ocean Science Lecture Series."
- FAU, Flagler Credit Union Announce Football Stadium Naming PartnershipA historic, 15-year football stadium naming partnership between Florida Atlantic University Athletics and Flagler Credit Union was approved by FAU's Board of Trustees during a special meeting today.
- FAU's Randy D. Blakely, Ph.D., Honored as a Prestigious ASPET FellowRandy D. Blakely, Ph.D., a highly regarded neuroscientist and pharmacologist, is among an extraordinary group selected by the American Society for Pharmacology and Experimental Therapeutics.