Banks at Risk: The New Wave of Crises and Failures Coming from the USA

The Banking Sector: Facing New Turbulences

In recent years, the banking sector has had to deal with unprecedented turmoil, culminating in the dramatic collapse of Silicon Valley Bank (SVB) in 2023.
This event deeply shook the global financial system, evoking memories of the 2008 financial crisis.
In these recent days, the shadow of a new banking collapse is haunting stock market operators, and fears seem to once again be concentrated on the US regional segment.
But what is causing these new market fears?

A Look into the Past: What Caused the Silicon Valley Bank Collapse?

Silicon Valley Bank was one of the leading banks serving start-ups and tech companies.
However, several factors contributed to its downfall.
Firstly, an excessive reliance on long-term and high-risk investments exposed the bank to serious vulnerabilities.
Additionally, inadequate risk management and lack of liquidity worsened the situation, leading to a loss of trust from depositors and ultimately a run on the bank.

New Alert for US Regional Banks

Today, just over a year later, the banking landscape seems to be reliving a similar nightmare.
According to a report by Pacific Investment Management, as reported by Bloomberg, a “very high” concentration of troubled commercial real estate loans is expected on the balance sheets of banks.
This situation particularly affects regional credit institutions, which are facing a drastic revaluation of the properties they have invested in.

New York Community Bancorp, for example, has already cut dividends and accumulated more liquidity to cope with potentially non-performing loans.
At the same time, US Bancorp has increased provisions for credit losses.

Market Expectations

These developments have already begun to impact the financial markets, amplifying a new wave of short selling.
ETFs on regional banks have experienced a significant contraction, reflecting the growing pessimism among investors.
For instance, the SPDR® S&P Regional Banking ETF (KRE) has lost almost 8% in the last month, fully expressing the new concerns of market operators.

Further worsening the sentiment is the US monetary context.
The Federal Reserve has maintained a resilient stance towards interest rate cuts, and the market once again prices in a “higher for longer” scenario, meaning high-interest rates for an extended period.
This is reflected in an increase in the DXY (Dollar Index) and a curious reverse correction in gold, indicating a certain market tranquility regarding the country’s economic performance.

Despite the apparent calm, the current situation could foreshadow an unexpected contraction.
The Federal Reserve’s inability to cut rates could indeed create a true financial Armageddon, with regional banks once again being questioned by analysts.