More than 60 US banks are on the brink of collapse and, therefore, were included in the list of financial entities that deserve special attention from the authorities of that country. According to the Federal Deposit Insurance Corporation (FDIC), the “List of Problem Banks” has grown several points since last year, after increasing from 52 banks at the end of 2023, to a total of 63 in the first quarter of 2024.
This list highlights the banks that present financial, operational and management weaknesses. In general, when a banking entity is included in this list, it is a clear indication that that institution is on the verge of collapse. This is because it presents difficulties that could put the security of customer deposits at risk. Although the US FDIC did not identify any of the more than 60 “problem banks,” it did indicate that the total assets in their hands grew. In detail, these institutions have, as of the first quarter of 2024, USD 82.1 billion under management. That's an increase of more than 400% on a quarterly basis. These banks now have more than half a trillion dollars in losses recorded on their balance sheets, due in large part to exposure to the residential real estate market. Unrealized losses represent the difference between the price banks paid for the securities and the current market value of those assets. Whatever the case, the rise of banks on the verge of collapse in the United States raises fears among clients and investors. This, as that nation's banking sector “continues to face significant risks arising from the continued effects of inflation,” according to the FDIC. Although it goes further, they also have influence interest rate volatility as well as geopolitical uncertainty. Factors that, according to the FDIC, “could cause credit quality, earnings and liquidity problems” for the US banking industry.
Remembering the crisis of 2023
The rise of banks on the verge of collapse in the United States is reminiscent of the banking crisis experienced last year, when large financial institutions declared bankruptcy, shaking the foundations of the American financial system.
As reported by BitcoinDynamic, in 2023 a domino effect occurred in different banks, with Silicon Valley Bank (SVB) being the Genesis of that crisis. That institution announced its closure in March 2023. It was the second largest bank failure in the history of the country since the 2008 financial crisis. After SVB, the closure of Silvergate Bank, Signature Bank and First Republic Bank, large financial entities, was recorded. Americans who, that is to say, were related to the emerging ecosystem of cryptocurrencies. Now, the fall of these financial institutions was due to different factors, including the economic decisions made by the Federal Reserve (FED) and the Treasury Department. More precisely, the aid injected by the government when the COVID-19 pandemic and the subsequent increase in interest rates, element that played an important role in the banking crisis of 2023.
In March 2020, interest rates remained at 0%. But as a result of the intervention of the US government, these indicators they went to more than 5% in a matter of 24 monthsas shown in the graph below fromdatamacro.com.
Interest rates have grown progressively in the US since 2020. Source:Datamacro.com. Now, the FDCI's alert about the more than 60 “problem banks” operating in the United States is known before the FED makes a new decision on interest rates. On June 12, the president of the FED, Jerome Powell, is scheduled to publish the new adjustments to interest rates. Currently, these remain in a range of 5.25% – 5.50%. If interest rates increase, banks will receive an impact resulting in greater market volatility, less incentive to lend and an impact on profitability. In addition to greater nervousness in the market in the face of a possible collapse of the banking system. And if interest rates fall, although it would be a relief for banks and investors, it would create the perfect scenario for inflation, which closed April 2024 at 2.7%, to increase and, consequently, threaten power. purchasing power of Americans.
Bitcoin, the anti-collapse bank of the traditional financial system
Amid warnings about more US banks on the brink of collapse, bitcoin (BTC) reinforces its position as an alternative to the possible bankruptcy of financial entities. While the asset price has proven to be susceptible to US macroeconomic decisions, such as the increase or decrease in interest rates or inflation; BTC is an asset that has remained unscathed even as American banking has been shaken. An example of this is that, right now, when the FDIC warns of more banks at possible risk of bankruptcy, bitcoin walks above USD 70,000 for each coin. And aiming to continue rising, influenced by growing institutional demand for spot ETFs in the US, Hong Kong and Australia. But beyond the price, BTC shows that it is better for financial institutions because, unlike banks, It is not, nor can it be, at risk of collapse.
It's time to remember that Bitcoin was created as a direct response to the Great Financial Crisis of 2008. During that period, many people were left bankrupt as a result of the collapse of the financial system. From then on, stopping trust in centralized institutions is part of the message that Satoshi Nakamoto sent to the world when the creation of Bitcoin was proclaimed. And along with this, the idea was promoted that the best option to protect yourself from financial collapses is a decentralized network or system that functions like a personal bank, without the need for third parties to validate or endorse it. Given the dependence of traditional banks on the monetary policies of a government or State, BTC emerges as an alternative in which, regardless of government decisions, it remains an unstoppable and unconfiscatable monetary protocol.