Banks are the core organizations in the financial system and can be said to be an important part of the financial industry. However, in the ever-evolving financial market, banks also face various problems and challenges, and how to deal with these challenges has become a topic that the industry must explore.
Recently, the collapse of the Silicon Valley Bank in the United States has attracted widespread attention and discussion. It is understood that Silicon Valley Bank is a bank specializing in serving the technology industry, and due to repeated violations, it has led to penalties by administrative agencies, serious customer loss, and eventually bankruptcy. The occurrence of this incident has made people see the difficulties faced by banks in the process of marketization.
Since the outbreak of the subprime mortgage crisis in 2008, the regulation and risk control of the US banking industry has become more stringent. However, despite these adjustments, recent data shows that nearly 200 U.S. banks remain at risk of thunderstorms, which is not only a problem in Silicon Valley, but may even determine the future policy direction of the Biden administration.
Therefore, the US banking system is facing a very dangerous moment, because according to the warning of former Federal Deposit Insurance Corporation Chairman Beyer, it is close to the "Bear Stearns moment" before the financial crisis of '08. This moment refers to six months before the collapse of Lehman Brothers, when the Federal Reserve approved JPMorgan's acquisition of Bear Stearns Bank and provided special financing assistance to it.
According to data analysis by the Wall Street Journal, as of the end of the first quarter of this year, a total of 54 banks around the world were classified as "systemically important financial institutions", of which 17 were located in the United States, and they assumed the core functions of the US financial system. In addition to this, nearly 200 banks are listed as potential risks, and the combined assets of these banks account for nearly 12% of the total assets of the U.S. banking industry.
Much of these potential risks come from smaller banks, whose lending performance has deteriorated over the past few years, revealing ongoing pressures that could have a greater impact on the U.S. financial system. In recent years, for example, the U.S. commercial real estate industry has entered a cyclical trough, which has kept non-performing loan ratios at many small banks at high levels, which is only likely to worsen as the pace of economic recovery slows.
In addition, competition in the US banking sector is not necessarily positive. Challenged by emerging technologies such as the internet and mobile payments, more and more consumers and businesses are choosing to abandon traditional banks and turn to online payment services from companies like PayPal and Square. This means that other supporting small banking economies may also face greater threats.
In the face of these potential risks, the current Biden administration's position is particularly complicated. Contrary to the Trump administration, most current economic policies tend to favor stronger financial regulation to better protect the interests of consumers and investors. However, if these small banks go bankrupt, it may have a greater impact on the economic recovery of the United States. This adds a conundrum to the Biden administration's economic team: What kind of policy should be adopted to balance these two factors?
Of course, despite these problems, the U.S. banking sector as a whole remains relatively healthy. After all, banks now have better capital adequacy ratios and less tolerance for risk than they did during the subprime mortgage crisis in 2008. However, lending opportunities from these banks remain critical on the road to economic recovery, especially for SMEs looking to support their business growth with loans.
In conclusion, the current potential risks to the US banking industry are not small, especially for small banks. While the current policy trend is to strengthen regulation and protect consumer rights, the Biden administration also needs to consider how to maintain economic stability while balancing the interests of all parties, which will bring them new challenges.