As the OBiden economy implodes, with interest rates rising and sovereign, commercial and consumer debt exploding, regional banks are coming under enormous pressure.
The reason is very simple. Banks have on their books U.S. Treasury securities as assets, which were just downgraded due to the irrational, irresponsible, diabolical financial mismanagement of the Biden administration. This drives their value lower, so more capital needs to be added to bank balance sheets. Concurrently, spreads between funding sources and loan revenue contacts or even goes negative, causing further pressure on a bank's finances.
“U.S. banks continue to contend with interest rate and asset-liability management (ALM) risks with implications for liquidity and capital, as the wind-down of unconventional monetary policy drains systemwide deposits and higher interest rates depress the value of fixed-rate assets,” Moody’s analysts Jill Cetina and Ana Arsov said in the accompanying research note, reported CNBC.
“Meanwhile, many banks’ Q2 results showed growing profitability pressures that will reduce their ability to generate internal capital. This comes as a mild U.S. recession is on the horizon for early 2024 and asset quality looks set to decline from solid but unsustainable levels, with particular risks in some banks’ commercial real estate (CRE) portfolios.”
10 regional banks were downgraded, while multiple money-center banks were put on credit watch.
Commercial real estate is crumbling.
This is going to get much worse before it gets better.
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