Global Financial Stability Notes

The US Banking Sector since the March 2023 Turmoil: Navigating the Aftermath

By Tobias Adrian, Nassira Abbas, Silvia Ramirez, Gonzalo Fernandez Dionis

March 5, 2024

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Tobias Adrian, Nassira Abbas, Silvia Ramirez, and Gonzalo Fernandez Dionis. The US Banking Sector since the March 2023 Turmoil: Navigating the Aftermath, (USA: International Monetary Fund, 2024) accessed December 17, 2024

Summary

In March 2023, the US banking sector turmoil sent a shockwave through the global financial system. Silicon Valley Bank (SVB), the 16th largest bank in the country, collapsed in a matter of days, followed by Signature Bank (SBNY) and First Republic Bank (FRB), marking the largest bank failures after Washington Mutual Bank in 2008. Triggered by sizable deposit outflows, this event raised concerns about the soundness of the rest of the US banking sector, in particular, other banks of similar or smaller size with large amounts of uninsured deposits, unrealized losses, and commercial real estate exposures. The March turmoil is a powerful reminder of the challenges posed by the interaction between tighter monetary and financial conditions and the buildup in vulnerabilities—challenges amplified by ineffective interest, liquidity, and credit risk management practices at some banks. This note offers an analysis of the main attributes of the affected banks to assess the extent to which vulnerabilities persist in a weak tail of banks . Furthermore, the note provides a prospective assessment by evaluating the medium-term risks to financial stability posed by this weak tail.

Subject: Asset and liability management, Commercial banks, Deposit insurance, Distressed institutions, Financial crises, Financial institutions, Financial sector policy and analysis, Financial sector stability, Liquidity

Keywords: 2023 banking turmoil, Bank equity Index, Bank runs, Bank Term funding program, Commercial banks, Compounds financial conditions, Deposit insurance, Deposit outflow, Distressed institutions, Financial sector stability, First Republic Bank, Global, IMF Library, Liquidity, Regional banks, Signature Bank, Silicon Valley Bank, US banking sector

Publication Details

  • Pages:

    20

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Global Financial Stability Notes No 2024/001

  • Stock No:

    GFSNEA2024001

  • ISBN:

    9798400267437

  • ISSN:

    2791-3112

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