FAU Expert: Almost 300 Banks Are at Higher Risk of Failure (2024)

FAQs

Are banks at risk of failure? ›

More than 60 of the largest banks in the country are at increased risk of failure due to their commercial real estate (CRE) exposures, according to a data analysis from a finance expert at Florida Atlantic University.

State regulators closed Republic First Bank in April 2024, marking the first bank failure of the year. Fulton Bank entered into an agreement with the FDIC to purchase most of Republic First's $6 billion in assets and to assume most of its $4 billion in deposit liabilities.

During a recession, banks are more likely to experience loan defaults, lower profits, and higher operating costs. If a bank is not adequately prepared to weather an economic downturn, it may not survive. Banks are also vulnerable to fraud and mismanagement, both from within and outside the organization.

Bank failures happen more often than you might think—there have been 569 in the U.S. since January 1, 2000. That's an average of about 25 per year. But the back-to-back collapses of Silicon Valley Bank (SVB) and Signature Bank in early 2023, followed by First Republic Bank in May, were unique in more ways than one.

The major risks faced by banks include credit, operational, market, and liquidity risks. Prudent risk management can help banks improve profits as they sustain fewer losses on loans and investments.

Too big: The notion that some financial institutions are just too large, and distort markets or threaten financial stability. To fail: A bank is so interconnected with other institutions that its failure would create panic or broad financial instability.

JPMorgan Chase, the financial institution that owns Chase Bank, topped our experts' list because it's designated as the world's most systemically important bank on the 2023 G-SIB list. This designation means it has the highest loss absorbency requirements of any bank, providing more protection against financial crisis.

If your bank closes, you should receive notification of what will happen to your money from the FDIC or NCUA, the acquiring bank or both. You'll automatically have an account at the new bank, or the FDIC or NCUA will issue you a payment returning your funds.

Who wins when a bank fails? ›

Here's what typically happens. The FDIC announces that the bank is closed, and the FDIC is appointed as its receiver so it can help use the bank's assets to pay depositors and creditors. In most cases, the FDIC will try to find another banking institution to acquire the failed bank.

Consulting firm Klaros Group analyzed about 4,000 U.S. banks and found 282 banks face the dual threat of commercial real estate loans and potential losses tied to higher interest rates.

Moody's has a negative outlook on the U.S. banking industry for 2024. Fitch gave the sector a deteriorating outlook, expecting a “moderate amount” of bank failures over the course of the year.

The collapse of Washington Mutual (WaMu) in 2008 stands out as the largest bank failure in U.S. history, according to the FDIC.

1. JPMorgan Chase. JPMorgan Chase, or Chase Bank, is the biggest bank in America with nearly $3.4 trillion in assets. It boasts a vast network of over 4,800 physical branches and more than 15,000 ATMs.

While there are always risks involved in the banking industry, Bank of America does not appear to be in imminent danger of collapse. However, customers and investors should always monitor the bank's financial health and risk profile and stay informed of any changes or developments that may affect the bank's stability.