U.S. Banks Exposed to Potential Financial Crisis, Report Finds

A new report reveals that 94 U.S. banks are at high risk of facing bank runs from uninsured depositors if they show signs of financial instability.

Research from Florida Atlantic University highlights that these banks, including seven major financial institutions, have an uninsured deposit ratio of 50% or more compared to their total deposits.

The study’s index on liquidity risk from uninsured deposits indicates that BNY Mellon leads with a 100% uninsured deposit ratio, followed by State Street Bank at 92.6%, Northern Trust at 73.9%, Citibank at 72.5%, HSBC Bank at 69.8%, JP Morgan Chase at 51.7%, and U.S. Bank at 50.4%.

Finance professor Rebel A. Cole from Florida Atlantic University explains that these banks are particularly exposed to liquidity issues because uninsured depositors tend to withdraw their funds quickly if they sense any instability.

The recent collapse of Republic First Bank in Pennsylvania, which was at number 87 on the previous quarter’s list with a 51.5% uninsured deposit ratio, underscores this vulnerability. Cole notes that all banks listed are at significant risk of experiencing runs if they encounter any financial weaknesses related to commercial real estate or unrealized securities losses.

While FDIC-insured accounts are protected up to $250,000 in case of bank failure, regulatory bodies like the FDIC, Federal Reserve, and Treasury Department used systemic risk measures to cover all deposits in last year’s notable bank failures, including Silicon Valley Bank, Signature Bank, and First Republic Bank. For Republic First Bank’s failure this year, the FDIC swiftly facilitated Fulton Bank to take over all deposits.