The year 2023 has been marked by a series of bank failures in the United States that have shaken the confidence of depositors, investors and regulators alike. The recent collapse of three large banks within a span of five days, that had significant exposure to the technology sector and cryptocurrency, has triggered fears of a systemic crisis similar to the one that occurred in 2008. In this blog post, we will explore how many banks have failed in 2023, what were the underlying issues for their failure, and how they compare to the 2008 bank failures.
How many banks have failed in 2023?
According to the Federal Deposit Insurance Corporation (FDIC), as of March 15, 2023, four banks have failed in the United States this year. These include Silvergate Bank, Silicon Valley Bank, Signature Bank, and First Midwest Bank.
What were the underlying issues for their failure?
The banks that have failed in 2023 had different underlying issues for their failure. Silvergate Bank, a niche player that specialized in serving cryptocurrency firms and investors, was unable to sustain the losses suffered in its loan portfolio amid a sharp decline in cryptocurrency prices and increased regulatory scrutiny.
Silicon Valley Bank, one of the largest banks catering to technology startups and venture capital firms, experienced a bank run that drained more than $20 billion of its deposits within two days. The bank run was triggered by fears that Silicon Valley Bank’s exposure to risky loans to tech companies would result in massive losses as interest rates rose and valuations fell.
Signature Bank, a regional bank that served mainly real estate developers and cryptocurrency firms, suffered due to a decline in the real estate market and the collapse of several cryptocurrency companies it had lent to. First Midwest Bank, a commercial bank headquartered in Chicago, failed due to poor lending practices and inadequate risk management.
How do they compare to the 2008 bank failures?
The 2023 bank failures have similarities to the 2008 bank failures, such as inadequate risk management and exposure to risky loans. However, there are some key differences. The 2008 financial crisis was largely caused by the subprime mortgage market, while the 2023 bank failures were triggered by a combination of factors, including exposure to cryptocurrency and the technology sector, as well as poor lending practices. Additionally, the 2008 bank failures were systemic and affected many banks, while the 2023 bank failures were isolated incidents.
The recent bank failures in 2023 have caused concern among depositors, investors, and regulators, and have highlighted the need for better risk management practices in the banking industry. It is important for banks to diversify their portfolios and avoid excessive exposure to any one sector or asset class. Additionally, banks must ensure that their lending practices are sound and that they have adequate risk management systems in place. Finally, regulators must remain vigilant and take swift action to resolve failing banks and protect depositors’ money.
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Keywords: 2023 Bank Failures, US Banks, Silvergate Bank, Silicon Valley Bank, Signature Bank, First Midwest Bank, Risk Management, Cryptocurrency, Technology Sector, Bank Run, Financial Crisis