Scores of U.S. banks are facing similar balance sheet risks to those that brought down Silicon Valley Bank a couple of weeks ago, as the nation’s central bank keeps on raising interest rates.
That’s according to an academic paper by Erica Jiang of Chicago Booth, Gregor Matvos of Kellogg School of Management, Tomasz Piskorski of Columbia School of Business and Amit Seru of Stanford Business School.
The paper analyzed more than 4,800 U.S. banks to determine their exposure to the risks that led to the failure of SVB.
One of those risks was interest rate risk, the negative impact of rising interest rates on the asset side of the balance sheet — the market value of fixed interest rate assets — over the period of March 2022 to March 2023, and the finding was worrisome: The market value of a typical U.S. bank’s assets dropped by 9%, which translates into $2.2 trillion.
Source : Several US banks face comparable risks to SVB as Fed maintains rate hikes