top of page
Search

Why the recent US bank turmoil is a storm in a bean(counter's) cup

Updated: May 25

Pella’s analysis of the recent US bank turmoil indicates that the issue is contained to smaller banks, with high uninsured deposit ratios, and high customer concentration. Banks that satisfy all three of these factors probably comprise less than 3% of the banking system. However, a pullback in bank lending should be expected, which will be a headwind to GDP growth and could hit the commercial real estate market particularly hard.


Bank failures are common

Bank failures are common in the US. This chart illustrates the number of bank failures in the US annually from 1970 to 2020. During that fifty-year period there were only three years where a bank failure did not occur.

Source – FDIC, BankFind Suite: Bank Failures & Assistance Data


Most of these banks are tiny with 90% of the failures having less than $5Bn in assets and there have only been seven banks with more than $100Bn in assets that have failed.

Source – FDIC, Pella, US Department of Labor


Amid these failed banks, SVB, First Republic, and Signature are relatively large, which is why they have garnered so much attention. However, the key word here is ‘relatively’ and in absolute terms these banks remain minnows.


List of largest US bank failures and bailouts

Rank

Name

Year

Assets; $Bn ^

1

Bank of America *

2009

2,007

2

Citibank *

2008

1,641

3

Washington Mutual

2008

417

4

MBNA

2009

218

5

First Republic

2023

213

6

SVB Financial

2023

212

7

Countrywide

2009

161

8

Continental Illinois

1984

112

9

Signature Bank

2023

111