Why hundreds of U.S. banks may be at risk of failure

Hundreds
of
small
and
regional
banks
across
the
U.S.
are
feeling
stressed.

“You
could
see
some
banks
either
fail
or
at
least,
you
know,
dip
below
their
minimum
capital
requirements,”
Christopher
Wolfe,
managing
director
and
head
of
North
American
banks
at
Fitch
Ratings,
told
CNBC.

Consulting
firm
Klaros
Group
analyzed
about
4,000
U.S.
banks
and
found
282
banks
face
the
dual
threat
of
commercial
real
estate
loans
and
potential
losses
tied
to
higher
interest
rates.

The
majority
of
those
banks
are
smaller
lenders
with
less
than
$10
billion
in
assets.

“Most
of
these
banks
aren’t
insolvent
or
even
close
to
insolvent.
They’re
just
stressed,”
Brian
Graham,
co-founder
and
partner
at
Klaros
Group,
told
CNBC. “That
means
there’ll
be
fewer
bank
failures.
But
it
doesn’t
mean
that
communities
and
customers
don’t
get
hurt
by
that
stress.”

Graham
noted
that
communities
would
likely
be
affected
in
ways
that
are
more
subtle
than
closures
or
failures,
but
by
the
banks
choosing
not
to
invest
in
such
things
as
new
branches,
technological
innovations
or
new
staff.

For
individuals,
the
consequences
of
small
bank
failures
are
more
indirect.

“Directly,
it’s
no
consequence
if
they’re
below
the
insured
deposit
limits,
which
are
quite
high
now
[at]
$250,000,”
Sheila
Bair,
former
chair
of
the
U.S.
Federal
Deposit
Insurance
Corp.,
told
CNBC.

If
a
failing
bank
is
insured
by
the

FDIC,
all
depositors
will
be
paid “up
to
at
least
$250,000
per
depositor,
per
FDIC-insured
bank,
per
ownership
category.”

Watch
the video to
learn
more
about
the
risk
of
commercial
real
estate,
the
role
of
interest
rates
on
unrealized
losses
and
what
it
may
take
to
relieve
stress
on
banks
—
from
regulation
to
mergers
and
acquisitions.