US banking crisis is not over, experts warn

The debt ceiling crisis has hogged headlines but an economic crisis we all forgot about is still bubbling away, experts have warned.

The debt ceiling crisis has hogged headlines but an economic crisis we all forgot about is still bubbling away, experts have warned.

The US banking crisis is far from over, with more banks slated to collapse in coming months as the global economic outlook worsens.

Over in the US, the debt ceiling crisis has occupied the minds of global and local economists in recent weeks but the banking crisis is also still a huge risk, experts have warned.

Earlier this year, the world was left reeling as three major US banks fell in quick succession — Silicon Valley Bank, Signature Bank and First Republic Bank. A more niche crypto bank called Silvergate Capital went bankrupt several weeks earlier.

Credit Suisse also had to be absorbed by its larger rival over in Europe as the situation became out of control with deposit holders panicking and taking their funds out en masse.

Now several market commentators as well as government bodies have warned everyone to brace for more financial institutions to topple like dominoes.

US Treasury Secretary Janet Yellen said more banks may have to merge to survive the oncoming onslaught. Smaller banks were particularly on the firing line and may have to join forces with the larger ones if they wished to avoid bankruptcy.

First Republic was merged with JPMorgan Chase as it was on its last legs. Picture; Spencer Platt/Getty Images/AFP (

Big four accounting firm EY issued a sobering warning earlier this month.

“Banking sector turmoil is contained but not over, and the impact on the economy will linger as smaller banking institutions play a key financial role,” EY economists wrote in a recent note.

Fitch Ratings Service echoed that sentiment, writing several days ago that banks with less than $100 million in assets were particularly at risk. If investors all pulled their funds out at once, it could be catastrophic.

These ‘smaller’ banks were seen to be “more susceptible to deteriorating commercial real estate fundamentals than larger banks”, Fitch wrote.

Overall, these smaller players had a “higher relative exposure” to risks, the firm stated.

Security guards and FDIC representatives open a Silicon Valley Bank (SVB) branch for customers at SVB’s headquarters in Santa Clara, California, on March 13, 2023. Picture: Noah Berger /AFP

For an idea of the scale of the crisis, the three major banks that have collapsed so far this year lost US$559 billion (A$858b) in assets including customer deposits in total.

During the 2008 global financial crisis, 25 banks bit the dust.

A CNN analysis that adjusted for inflation found that $523 billion (A$803b) in deposits held by those 25 banks was lost — which means more deposits have been lost this year than in the GFC.

During the GFC, the Washington Mutual collapsed, which is considered the largest bank failure in US history.

Over the three years that followed, nearly 400 federally-insured banks also followed its path into oblivion. Seven years later, the total number sat at 500, according to the New York Times.

In the words of Ian Narev from 2016, the former CEO of the Commonwealth Bank of Australia, “The only thing the public would like less than a profitable bank is an unprofitable bank”.

Originally published as US banking crisis is not over, experts warn