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 Research
- FAU REPORT: Consumers Face Elevated Prices Despite Waning InflationThe years of high inflation appear to be over as inflation is now in line with the Federal Reserve's target, though prices will likely remain permanently elevated, according to the Monthly Inflation Report.
- FAU Engineers Win NSF Grant for Unique School of AI Bio-Robotic FishA school of bio-robotic fish with advanced sensors will create a versatile network capable of maneuvers and station-keeping beyond current vehicles in shallow coastal areas and in deep ocean environments.
- FAU Poll: Presidential Race Tightens Across Key Battleground StatesLatest FAU polls reveal a highly competitive landscape in the battleground states of Michigan, Pennsylvania and Wisconsin, with both the presidential and U.S. Senate races showing narrow Democratic leads.
- Poll: Races Neck-and-Neck in Final Weeks, Florida Amendments May PassThe latest polls reveal tight national races and Florida amendments on the cusp of passing.
- FAU Awarded DOE Grant to Test Offshore Ocean Current EnergyFAU's Southeast National Marine Renewable Energy Center has received an $800,000 grant from the U.S. Department of Energy to advance ocean energy technologies with a test facility offshore Palm Beach County.
- Dramatic Drop in Marijuana Use Among U.S. Youth Over a DecadeUsing a national survey of 88,183 U.S. adolescents in grades nine to 12, a study shows marijuana use declined from 2011 to 2021. Findings also reveal changing landscapes of use by gender, race, and ethnicity.