Over 200 US banks at risk of failure in 2024 - July 1, 2024

July 1, 2024

According to various reports and studies, over 200 US banks are at risk of failure in 2024. This is due to a combination of factors, including commercial real estate loans, higher interest rates, and potential losses tied to these rates.

Commercial Real Estate Loans

A study by Klaros Group analyzed about 4,000 US banks and found that 282 banks face the dual threat of commercial real estate loans and potential losses tied to higher interest rates. The majority of these banks are smaller lenders with less than $10 billion in assets.

Higher Interest Rates

Higher interest rates can lead to unrealized losses on commercial real estate loans, which can put pressure on banks’ balance sheets. This, in turn, can increase the risk of bank failures.

Potential Consequences

If a failing bank is insured by the FDIC, all depositors will be paid “up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category.” However, communities may still be affected in ways that are more subtle than closures or failures, such as banks choosing not to invest in new branches, technological innovations, or new staff.

List of Failed Banks (2009-2024)

As of July 2024, there have been 567 bank failures in the United States since 2001.  In 2023, several prominent bank failures raised concerns about the stability of the banking sector. The collapses of Silicon Valley Bank, Signature Bank, and others sent shockwaves through the industry.

Top Bank Risks for 2024

Experts have identified compliance risk, interest rates, and credit as top bank risks for 2024. Compliance risk is amplified by the rapid adoption of artificial intelligence and generative AI technologies. The greatest worry expressed by bankers and experts is the onslaught of regulatory changes.

FDIC: Bank Failures in Brief - 2024

As of July 2024, there is 1 bank failure in 2024. The FDIC provides detailed descriptions of each bank failure.