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Business and Economics > Banks and Banking

You are looking at 1 - 3 of 3 items for :

  • Type: Journal Issue x
  • Global Financial Stability Notes x
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Cover Global Financial Stability Notes
The US Banking Sector since the March 2023 Turmoil: Navigating the Aftermath
Tobias Adrian
,
Nassira Abbas
,
Silvia Ramirez
, and
Gonzalo Fernandez Dionis
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.
Keywords:
US banking sector; regional banks; bank runs; 2023 banking turmoil; Silicon Valley Bank; Signature Bank; First Republic Bank; bank equity Index; deposit outflow; IMF Library; bank Term funding program; compounds financial conditions; Commercial banks; Distressed institutions; Deposit insurance; Financial sector stability; Liquidity; Global
Cover Global Financial Stability Notes
What Is Driving the Rise in Advanced Economy Bond Yields?
Rohit Goel
and
Sheheryar Malik
The nominal bond yields for advanced economies rose sharply during the first quarter of the year. This note analyzes the drivers of this increase across the jurisdictions and tenors of the yield curve. A key investor focus, in particular, has been the rise in the nominal bond yields in the United States, which has had notable global financial stability spillovers. The analysis indicates that the rise in inflation expectations is the primary driver of the rise in US nominal bond yields over the near term, whereas, the rise in real yields has been the major contributor to the rise in longer-term yields. The change in term premiums has also played a key role in driving both the longer-term inflation breakeven and real yields. Considering other major advanced economies, while inflation expectations have risen across the board in the near term, change in real yields appear more pertinent a driver for shifts in longer-term yields.
Keywords:
advanced economies, bonds, bond yields, COVID-19, pandemic; inflation expectation; nominal bond yields; investor focus; breakeven inflation; inflation risk; Inflation; Yield curve; Bond yields; Return on investment; Global
Cover Global Financial Stability Notes
Commercial Real Estate and Financial Stability: Evidence from the US Banking Sector
Mr. Salih Fendoglu
This note analyzes the implications of changes in commercial real estate (CRE) prices for the stability of the US banking sector. Using detailed bank-level and CRE price data for US metropolitan statistical areas, the analysis shows that, following a decline in CRE prices, banks with greater exposures to CRE loans perform worse than their counterparts, experiencing higher non-performing CRE loans, lower revenues, and lower capital. These effects are particularly pronounced if the drop in CRE prices turns out to be persistent because of possible structural shifts in CRE demand—for example, because of an increased trend toward e-commerce and teleworking—even after the coronavirus disease (COVID-19) pandemic is over. The impact of a decline in CRE prices is especially true for small and community banks, which tend to have the highest CRE loan exposures. While the US banking sector has remained resilient during the pandemic crisis due to strong capital buffers and massive policy support, these findings suggest that continued vigilance is warranted with regard to potential downside risks to CRE prices amidst ongoing structural shifts in the sector.
Keywords:
commercial real estate, banking, loans, nonperforming loans; loan exposure; CRE price; changes in commercial real estate; CRE demand; CRE loan; Loans; Commercial banks; Nonperforming loans; Bank credit; Deposit insurance; Global