The banking sector is in crisis mode. The FDIC’s Second Quarter 2024 report reveals a sharp increase in banks at risk of failure, with the Problem Bank List ballooning from 63 to 66. This is the fifth consecutive quarter of rising numbers, signaling growing instability in the industry.
Banks on this confidential list receive a CAMELS rating, with scores of 4 or 5 indicating severe financial and managerial issues that could threaten their survival. These troubled institutions now make up 1.5% of all US banks, with the potential for insolvency looming if their problems aren’t resolved.
Unrealized losses are at the heart of this surge. The FDIC reported a staggering $512.9 billion in unrealized losses hitting US banks, a major contributor to the increase in problem banks. Without swift action, these banks risk collapse, and the FDIC may have no choice but to step in to prevent widespread fallout.
Reminder:
That chart is from the May 29th report and has a 2 Quarter lag time. pic.twitter.com/o1TNDJMYxD
— RealJohnGaltFLA (@RealJohnGaltFla) October 20, 2024
Maybe this will help you understand the scope of the problem. pic.twitter.com/exYaFPYGjU
— Porter Stansberry (@porterstansb) October 20, 2024