A new Federal Deposit Insurance Corporation report discovered that the banking sector is still grappling with ballooning unrealized losses, a high number of "Problem" banks, and various challenges that could worsen from high inflation and interest rates.
The U.S. financial regulator released the findings of the "FDIC Quarterly Banking Profile First Quarter 2024" report on May 29.
They represented 1.4 percent of total U.S. banks, "Which was within the normal range for non-crisis periods of one or two percent of all banks." These banks appeared on the "Problem Bank List" because they contained a CAMELS composite rating of "4" or "5." CAMELS is the FDIC's 1-5 rating system, which assesses a financial institution's performance, risk management practices, and degree of supervisory concern.
Deterioration in certain loan portfolios, particularly office properties and credit card loans, continues to warrant monitoring." More Turbulence Ahead, Experts Warn U.S. officials, be it at the Federal Reserve or the Treasury Department, have repeatedly assured the public that the banking system is safe, sound, resilient, and highly liquid.
"With commercial properties selling at serious discounts in the current market, banks eventually are going to be forced by regulators to write down those exposures." Another study found that large U.S. banks might have more CRE exposure than financial regulators think because of credit lines and term loans given to real estate investment trusts.
Researchers, including former Reserve Bank of India's deputy governor, Viral Acharya, purported that big banks' CRE lending exposure balloons by approximately 40 percent when indirect lending to REITs is factored in.
The Federal Reserve's Bank Term Funding Program, an emergency lending facility for financial institutions facing fiscal pressures launched in the fallout of the regional banking meltdown, expired in March.
State of Deposits While total commercial bank deposits are still below the April 2022 all-time high of $18.2 trillion, they have been steadily climbing since the Silicon Valley Bank and Signature Bank failures, totaling roughly $17.6 trillion.
In recent years, there has been a notable trend of deposit concentration as the five biggest banks control about one-third of all U.S. deposits.
According to a Securities and Exchange Commission filing, the bank has roughly 14 percent of all U.S. deposits, totaling $2.4 trillion.
The total number of FDIC-insured commercial banks has been steadily declining since the 1984 peak of 14,469.
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