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US Banking Stress Continues to Grow

Within the last week, the headlines in the US have shifted to the Debt limit issue from the Banking crisis. Despite this shift stress in the US Banking crisis that started in March continues. The data released within the last week indicates that the level of stress is still high.

The usage the special program Banking Term Funding Program (BTFP) was initiated to help the regional banks to switch their securities to cash has reached a new high of $83.1 Bn with $8 Bn increases in one week. Even the Fed loans to financial institutions are higher.

Deposit and lending by commercial banks also indicate the same stress. The total deposits fell for a second consecutive week and this week's fall was higher at $13.8 Bn. The total lending for banks fell by $15.7 Bn after seeing a large increase in the previous week.

This trend of data continues to point to the stress that still exists in the system. And banks like PacWest and others are finding it difficult to sustain. The largest US regional bank ETF. (KRE) is down by another 5.5% last week. It is tight now 60% down since the crisis began.

All these elements do not paint a positive picture of the issue being closed and might even point to volatility in the coming months. This stress might intensify as a large portion of Commercial Real Estate Loans that are held by Regional Banks are due to mature this year.


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