An analysis of approximately 4,000 banks by the consultancy Klaros Group has determined that 282 of these institutions carry high levels of commercial real estate exposure and large unrealized losses from the Federal Reserve’s rate hikes.
According to a CNBC report, these banks encompass nearly $900 billion in total assets. Klaros did not identify the banks out of concerns that making this information public would spark deposit runs.
However, most of the banks in question were community lenders with less than $10 billion in assets, while only 16 companies were regional banks with assets between $10 billion and $100 billion in assets. But these 16 regional banks collectively have more assets than the 265 community banks combined.
“If there were just 10 banks that were in trouble, they would have all been taken down and dealt with,” said Klaros co-founder Brian Graham. “When you’ve got hundreds of banks facing these challenges, the regulators have to walk a bit of a tightrope.”
“The bad news is, the problems faced by the banking system haven’t magically gone away,” Graham added. “The good news is that, compared to other banking crises I’ve worked through, this isn’t a scenario where hundreds of banks are insolvent.”
