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US Banking "Problem List" Grows

During the Jan- March 2023 quarter the number of problem banks in the USA has increased from 39 to 43 with assets increasing from $47Bn to $58Bn. This might have reversed the declining trend that started in Jan-March 2021 when the total problem banks were 55.

This would get confirmed as a trend from the next quarter's data. But for now, the possibility of this becoming a trend is more likely. This can be concluded as one of the leading indicator, unrealised gains or losses on investment securities is still showing a lot of stress.

Though during the recent quarter, losses have reduced on both type of securities, that is available for sale and held to maturity. The accumulated losses are right now more than $500 Bn as compared to $290 Bn during last year's same quarter.

This would prove to reflect actual stress when the Fed Stress test results are released at the end of this month. The result might lead to some banks requiring to raise capital. And doing this in the current financial conditions will not be an easy task.

That is why it next two quarters become very important to measure the actual impact of high interest rates on the banking system throughout the world.


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