Swedbank Strategist Says US Banking Crisis Is Spreading — Warns of More Banks Failing in ‘Vicious Spiral’

Bitcoin

A strategist at Swedbank, a Swedish bank, has warned that the regional banking crisis in the U.S. is spreading. After several bank failures, he stressed that Pacwest Bank, Western Alliance Bank, and First Horizon Bank have all been “subject to financial meltdowns.”

Swedbank on U.S. Banking Crisis Spreading

Pär Magnusson, a fixed income strategist at Swedbank, a Swedish bank based in Stockholm, has warned about the spreading of the U.S. banking crisis. He reportedly said:

After Silicon Valley Bank, Signature Bank, First Republic Bank and now potentially Pacwest Bank, Western Alliance Bank, and First Horizon Bank all having been subject to financial meltdowns, the proverbial cat will be very difficult to put back into the bag.

First Republic Bank was seized by regulators last week and most of its assets were sold to JPMorgan Chase. It was the biggest U.S. bank failure since 2008. Silicon Valley Bank and Signature Bank collapsed in March. Following the seizure of First Republic Bank, shares of several banks, including Pacwest and Western Alliance Bank, plummeted.

“It is hard not to see the irony of regional U.S. banks having successfully lobbied for less regulations during the Trump administration only to find that less regulations now is making them vulnerable to bank runs,” Magnusson opined.

The Swedbank strategist further cautioned:

The U.S. regional bank crisis is spreading. With every bank that succumbs to shrinking deposits and/or market distrust, the probability of more banks falling victim to similar fates grows. A vicious spiral may be about to take hold.

“A general risk-off reaction is becoming increasingly likely, and you should position for this risk,” the strategist concluded.

Despite multiple bank failures, Federal Reserve Chairman Jerome Powell stated that the U.S. banking system is “sound and resilient” as Fed officials raised interest rates by 25 basis points this week. The Federal Reserve recently revealed that 722 banks reported unrealized losses exceeding 50% of capital in the third quarter of 2022.

Tags in this story

Do you agree with the Swedbank strategist that the U.S. banking crisis is spreading? Let us know in the comments section below.

Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.




Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Read disclaimer

Products You May Like

Articles You May Like

Starboard sees an opportunity to create value at Riot Platforms amid growth in hyperscalers
Nissan and Honda hold merger talks
Muni yields rise but outperform UST selloff after FOMC rate cut
Higher business taxes take toll on UK economy as companies cut back hiring
Michigan township hack spells bigger cybersecurity troubles for munis

Leave a Reply

Your email address will not be published. Required fields are marked *