Investment giant warns of major wave of banking collapses in the United States
Key facts:
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The wave of difficulties is just beginning, the firm points out.
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Many regional banks in the country are under pressure.
“The real wave of anguish is just beginning,” says an executive at the investment firm Pacific Investment Management Co (Pimco), which published a report highlighting its concerns about the possibility of massive collapse of US regional banks.
The report has gone largely unnoticed, despite the fact that in it, the investment firm’s analysts, They foresee a terrifying scenario for the banking systemwith impact on the economy in general.
Concerns revolve around a “very high” concentration of troubled real estate loans on the books of borrowers of everything from shopping malls to offices.
As such, banks and lending institutions have been facing tough challenges in recent times. All this due to the fact that The United States Federal Reserve has decided to maintain high interest rates.
These are high borrowing costs that are causing high default rates. With this, lenders, mainly small banks, have been trapped in a whirlwind of debt from which they find it difficult to escape.
John Murray, head of Pimco’s global commercial real estate team, said in an interview that lenders have been stuck with assets that are difficult to sell. While, on the contrary, the largest banks have unloaded some of their highest quality assets first to avoid deeper losses.
“As distressed loans grow due to maturities, we expect banks to begin selling these more troubled loans to reduce their exposure.”
John Murray, head of Pimco’s global real estate team.
However, problems for America’s regional banks will persist as loans come due. While banks may escape immediate difficulties, there is still another area that needs close attention. These are the more than $200 billion in loans provided by debt funds in the United States, which expire in 2025, Murray said.
“The first asset-level stress catalyst is occurring right now, as assets will struggle to meet extension tests in this higher rate environment,” the Pimco executive added.
Warnings about possible bank failures are not only coming from Pimco, the Federal Deposit Insurance Corporation (FDIC) also identified difficulties in 63 US banks, as reported by CriptoNoticias.
When a bank is included in this list, it is a clear indication that this institution is on the verge of collapse. This is because it presents difficulties that could put the security of customer deposits at risk.
What is happening now has strong signs that link it to the financial crisis that occurred in 2008, as a demonstration that the massive collapse of banks can affect the economy as a whole.
