A quarterly financial statement issued by the United States regional bank, the Western Bank of the Pacific, shows a significant reduction in the bank’s deposits at the end of the quarter, causing market concerns, which have fluctuated in recent times. Since March this year, the United States has witnessed the collapse of the Silicon Valley Bank, the signing bank and the collapse of the total and banks.

The current banking sector in the United States, especially small regional banks, is facing challenges such as the loss of deposits, shrinking asset values and rising risk of undesirable assets. In addition, the risk of default on the United States federal Government’s debt has exacerbated the banking sector. Experts warned that the crisis was still unaltering and could continue to spread and impact on financial markets, and that the risks of spillover were of particular concern.

Securing funds

According to the UPU data, the total size of United States commercial bank deposits as at 26 April 2023 was less than $1.72 trillion, a decrease of approximately $600 billion compared to the level of $1.78 trillion last December. Among them, the size of deposits in small commercial banks declined from $563 million to $532 trillion, a contraction of approximately $310 billion.

A survey carried out in April by the United States company Gellop indicated that 48 per cent of respondents expressed concern about the security of deposits in financial institutions such as banks, which was higher than at the time of the international financial crisis in 2008. The concern of United States enterprises and residents about the security of deposits has led to the escape of deposit funds that are most heavily relied on by banks.

The loss of deposits will result in sustained increases in the size of lending to small and medium-sized banks and increased liability costs. Many small and medium-sized banks are forced to sell assets, such as long-term bonds, to cope with the loss of deposits, or to replenish liquidity by equating with high interest rates and lending to United States reserves.

Increase in commercial land vacancy rates

It is noteworthy that the United States commercial land-use rate has increased and that the loan default rate has recovered. Once the commercial real estate risk spreads, there will be another major innovation for small and medium-sized banks. Charles Mange, Vice-President of the Board of Directors of Berkhir-Hazarwe, United States of America, recently stated that the United States commercial estate market was plunging a storm and that, as real estate prices fell, United States banks were “repeated to poor loans”.

In addition, the risk of default on the United States federal Government’s debt will exacerbate the banking sector. On 19 January this year, the federal Government of the United States reached a statutory debt ceiling of $3.54 trillion. At present, the United States Democratic People’s Republic of Korea and the two parties are intensifying party disputes around the debt ceiling, making it difficult to agree on an increase in the debt ceiling. Once the federal Government defaults on part of its debt, it will result in a sharp increase in the United States debt rate, affecting the cost of automobile loans, mortgages and other borrowings, and aggravating the operating hardships of the banking sector.

According to the analysts, if the United States banking crisis continues to ferment, banks will be forced to tighten credit, shocking United States SMEs that rely on bank loans and private consumer credit. The Associated Stock Survey also shows that bank credit has accelerated since March this year.

United States dollar credibility

Analyses indicated that the banking crisis would also weaken the global ownership and credibility of the United States dollar. From less than $1 trillion to over $8 trillion in the 2007 to present, the size of the UNPF balance sheet has changed significantly in its asset structure, with the real intention of expanding from financial stability to global cost-sharing. The current volatility in the banking sector is the corollary of the United States unlimited overtake of dollar credits. (Representative of New China)