94 US banks are now at high risk according to a new report that suggests industry giants have many uninsured depositors.
An analysis from Florida Atlantic University found that billion-dollar-banks, including seven US financial giants, have reported a 50% (or higher) ratio of uninsured deposits to total deposits.
A recent index measuring the risk of banks losing money due to uninsured deposits shows that several major banks have a high percentage of uninsured deposits.
BNY Mellon has the highest percentage at 100%, followed by State Street Bank at 92.6%, Northern Trust at 73.9%, Citibank at 72.5%, HSBC Bank at 69.8%, JP Morgan Chase at 51.7%, and U.S. Bank at 50.4%.
This means that if these banks experience financial difficulties, a large portion of their depositors could lose their money as the Federal Deposit Insurance Corporation (FDIC) only guarantees up to $250,000 per depositor per bank.
Finance professor Rebel A. Cole explains that these banks are particularly vulnerable to liquidity crises because uninsured depositors are more likely to withdraw their funds quickly if they sense any risk to the bank’s stability.
This was seen in the recent failure of Republic First Bank, which had a 51.5% ratio of uninsured deposits.
The bank’s collapse triggered a run on its deposits, leading to its closure.
Cole warns that all the banks on the list face a serious risk of a similar run if they experience any financial weakness, such as losses from commercial real estate investments or unrealized losses on securities.
While the FDIC, Federal Reserve, and Treasury Department intervened to protect all depositors in last year’s bank failures of Silicon Valley Bank, Signature Bank, and First Republic Bank, there is no guarantee that they will do so again.
The FDIC’s quick action to arrange for Fulton Bank to assume all deposits in the case of Republic First Bank suggests that they are committed to minimizing disruption in the banking system.
However, the high percentage of uninsured deposits at these major banks raises concerns about the potential for future bank failures and the stability of the financial system.
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Also Read: Massive Banks Are Now Accused of Cheating Customers Billions
Other Economy News Today
Massive banks are now accused of cheating customers billions of dollars in interest payments according to financial reports.
According to a new report by Financial Times, several major Wall Street banks, including Wells Fargo, Morgan Stanley, and Bank of America, are accused of defrauding customers out of billions of dollars in interest payments.
The U.S. Securities and Exchange Commission (SEC) is currently investigating these banks to determine whether they intentionally steered clients toward “cash sweep” accounts that provided little to no interest earnings, despite the availability of higher-yielding options.
This alleged practice by the banks would amount to bilking customers out of significant sums of interest income that they should have rightfully earned on their deposits and cash holdings.
The SEC’s probe is aimed at uncovering whether this was a deliberate strategy by the banks to boost their own profits at the expense of their clients.
The report in the Financial Times highlights the concerning allegations of widespread misconduct by some of the largest financial institutions on Wall Street.
If substantiated, this could represent a major scandal involving the potential exploitation of customers through the mismanagement of their cash accounts and interest earnings.
The SEC’s investigation will be crucial in determining the full scope and nature of these alleged practices, as well as any potential enforcement actions or penalties that may be levied against the implicated banks.
The revelations have emerged from new Quarterly filings with the SEC.
In those filings, Wells Fargo says it’s in “resolution talks” with the agency over the issue, Morgan Stanley says the agency began asking questions about it in April and Bank of America confirms it’s currently being scrutinized.
All three banks have declined to comment on the matter.
Other financial firms involved in lawsuits related to cash sweep accounts include LPL Financial and Ameriprise.
LPL Financial says it plans to “vigorously” defend itself against the allegations, while Ameriprise has not released a public statement on the matter.
Also Read: The US Treasury Direct is Now Freezing Customer Accounts
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great stuff Frank
Thank you 🤝
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