June 24, 2024

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Why Mr. F. FDIC Chair Sheila Bair nervous about regional banks

Sheila Bell, former chairwoman of the Federal Deposit Insurance Corporation, said profits at regional banks could expose key weaknesses.

Their quarterly data begins to appear on Wall Street this week.

“I worry about a small number of them,” Bell told CNBC’s “Fast Money” on Tuesday. “I think some of them are still overly reliant on industrial deposits, have a lot of concentrated commercial real estate exposure, and then I think more The big picture is that if we had another bank, their uninsured deposits, even healthy deposits, might be unstable.

Bell, who ran the FDIC during the 2008 financial crisis, is nervous that regional bank problems starting in 2023 have not yet been fully resolved.

“Congress should reinstate the FDIC Trading account guarantee authority “That way they can stabilize those deposits,” she said. We’re just not quite sure what to expect.

Regions banks are having a rough year so far.this SPDR S&P Regional Bank ETF (KRE) That’s down nearly 13%, with only four members optimistic about 2024.

The biggest laggards in KRE are New York Community Bank It has fallen more than 71% this year. metropolitan bank holding corp.., Carney Financial, colombian banking system and valley national bank It fell by more than 30% during this period.

“The big question is whether there’s going to be another hit to uninsured deposits from bank failures, and I think that’s really the biggest challenge that regional banks are facing right now,” she said.

Her latest regional bank warning becomes benchmark 10-Year Treasury Bond Yield This week it exceeded 4.6%, hitting its highest point since November 2023.

Bell worries that higher yields could put more pressure on commercial real estate borrowers, with regional banks facing significant risks.

“Part of the problem with commercial real estate is that a lot of it is being refinanced this year and next year,” Bell said. “So the higher the interest rate on refinancing, the more difficult it will be for the borrower to continue making payments.”

However, regional bank issues could bring more business larger institutions.

“The troubles of regional banks are good for the big money center banks. There’s no doubt about it,” Bell said.

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