Hundreds of small and regional banks across the U.S. are feeling the pinch.
“You may see some banks either fail or at least fall below minimum capital requirements,” Christopher Wolfe, managing director and head of North American banking at Fitch Ratings, told CNBC.
Consulting firm Klaros Group analyzed about 4,000 U.S. banks The study found that 282 banks face the dual threat of commercial real estate lending and potential losses associated with rising interest rates.
Most of these banks are smaller banks with less than $10 billion in assets.
“Most of these banks are not insolvent, not even close to insolvent. They are just stressed,” Klaros Group co-founder and partner Brian Graham told CNBC. “That means there will be fewer bank failures. “But that doesn’t mean communities and customers won’t be harmed by this pressure.”
Graham noted that communities may be affected in more subtle ways than closures or failures, but banks choose not to invest in projects such as new branches, technological innovation or new employees.
For individuals, the consequences of small bank failures are more indirect.
Sheila Bair, former chairman of the Federal Deposit Insurance Corporation, told CNBC: “Straightforwardly, there are no consequences if you deposit below the insured deposit limit, which is currently quite high at $250,000. “
If a bankrupt bank is insured by an insurance company Federal Deposit Insurance Corporationall depositors will receive “at least $250,000 per depositor, per FDIC-insured bank, and per ownership class.”
watching video Learn more about the risks of commercial real estate, the role of interest rates on unrealized losses, and how to ease pressure on banks—from regulations to M&A.
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