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Troubled banks are on the rise in the US

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In the last quarter of 2023 they reached 52, marking the biggest jump since the collapse of SVB

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The number of troubled banks in the US has jumped by 18%, as the relevant regulatory authorities of the country warn, without referring, however, to their brands. They are, however, considered to be small and medium-sized units.

On top of that and not including them, the regional New York Community Bank (NYCB), which has been struggling with bad loans in commercial real estate, has stabilized after a $1 billion capital increase under the administration of former Treasury Secretary of the US, Steven Mnuchin. It has been 12 months since the collapse of the popular – in high-tech circles – Silicon Valley Bank (SVB), which rocked the US regional financial group system. That NYCB is still in trouble today is another indication that some banks remain vulnerable. According to what the Financial Times reports in its report, the US Federal Deposit Insurance Corporation (FDIC) announced that in the last quarter of 2023 the number of weak banks increased by eight to 52, marking the biggest jump since the collapse of SVB. It also said there are more delinquencies in credit card and commercial real estate loans, which are at their highest levels in nearly a decade. The chairman of the aforementioned organization, Martin Greenberg, said that “continued economic and geopolitical uncertainty, prolonged inflationary pressures, volatility in market interest rates and emerging risks in some banks' commercial real estate portfolios create major risks for the banking industry”.< /p>

NYCB is a mid-sized US financial group with more than $100 billion in assets and has suffered losses in its real estate loan portfolio after nearly doubling in size over the past 18 months through two rushed acquisitions of rival banks. And its stock rose at the end of the week as its new management told analysts it would diversify away from loans to apartment buildings, many of which are subject to New York's strict rent control laws, hence causing much from the bank's problems. Steven Mnuchin and Joseph Otting, the former regulator who took over as CEO of NYCB, have a track record of rebuilding troubled banks. They had bought failed mortgage lender IndyMac from the FDIC in 2008, restructured it and sold it to CIT Bank in 2015. Notably, the investors, including Mnuchin, who served in the Trump administration and was formerly a Goldman Sachs executive, are to reap hundreds of millions of dollars in profits if New York Community Bank stock holds its post-recapitalization gains. However, it should be mentioned that between February 5 and March 5, its customers withdrew $6 billion from their deposits, as a result of which its deposit base shrank by 7% to $77 billion. According to a report by CNN, finally, these moves do not constitute something massive, as typically happened a year ago when Silicon Valley Bank depositors withdrew $42 billion in one day, fearing that they will lose it if bankruptcy occurs.

Source: www.kathimerini.com.cy

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