A total of 94 US banks are at significant risk of experiencing bank runs by uninsured depositors if they show financial weakness, according to a new report.
An analysis from Florida Atlantic University finds the billion-dollar banks in question – which include seven US financial giants – have all reported a 50% or higher ratio of uninsured deposits to total deposits.
The University’s Liquidity Risk from Exposures to Uninsured Deposits index shows BNY Mellon has a 100% ratio of uninsured deposits, 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%.
Florida Atlantic University finance professor Rebel A. Cole says the banks are more vulnerable to liquidity crises because uninsured depositors are motivated to withdraw their funds quickly if they perceive any risk to a bank’s stability.
“The first bank failure of the year, Republic First Bank in Pennsylvania, was number 87 on the previous quarter’s list with a 51.5% ratio.
All of the banks on this list are at a serious risk of a run by uninsured depositors should they exhibit any weakness from commercial real estate exposures or unrealized losses on securities.”
Although FDIC-insured banks promise up to $250,000 will be protected in the event of collapse, the FDIC, Federal Reserve and Treasury Department used a systemic risk exception to make all depositors whole in last year’s high-profile bank failures of Silicon Valley Bank, Signature Bank and First Republic Bank.
In this year’s failure of Republic First Bank, the FDIC quickly arranged for Fulton Bank to assume all deposits.
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