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
- FAU Secures $21M Promise Neighborhoods Grant for Broward UPFAU has received the largest grant in its history from the U.S. Department of Education. Broward UP aims to transform poverty-concentrated neighborhoods in Broward County into communities of opportunity.
- Report: Logistics Industry Score Dips Heading into New YearThe logistics industry ended the year with a slight decrease in growth as retailers burned through inventory for the holiday season, according to researchers at FAU and four other schools.
- Firms Use Earnings Guidance to Mitigate Complexity of ESG DisclosuresCompanies in the U.S are turning to voluntary earnings guidance to prevent confusion resulting from ESG disclosures, according to a new study from researchers at FAU and another school.
- FAU Launches 'Center for Integrated Recovery and Wellness Studies'The new center launched by FAU's College of Social Work and Criminal Justice will advance substance use recovery research and promote community partnerships.
- Online Veteran Bachelor's Program Achieves First 'U.S.' News RankingFlorida Atlantic University's online bachelor's program for veterans is ranked for the first time at No. 67 in the nation for 2025 by U.S. News & World Report.
- 'Ding-Dong:' A Study Finds Specific Neurons With an Immune DoorbellFAU neuroscientists have identified that the receptor IL-1R1 plays a critical role in enabling neurons to directly communicate with the immune system.