Tuesday, Jun 18, 2024

Unanswered Questions Over Recent Bank Failures

A loss of investor and depositor confidence in California-based Silicon Valley Bank (SVB), as well as New York-based Signature Bank, has triggered a major banking crisis. The same crisis is also responsible for the demise of one of Europe’s oldest and most respected financial institutions, Switzerland-based Credit Suisse, and reportedly now threatens the solvency of up to two dozen vulnerable mid-sized American banks, starting with San Francisco-based First Republic Bank.

The crisis was triggered by the Federal Reserve’s policy of rapidly increasing interest rates over the past year in an effort to curb runaway inflation, and was aggravated by the poor management of the banks which have already failed.

Financial markets around the world are now closely watching the reaction to the emergency measures already employed by U.S. and European central bankers, financial regulators, and governments in an effort to contain the further spread of the crisis.

Meanwhile, the Federal Reserve, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank are cooperating in an effort to stabilize the global banking system in the wake of the sudden collapse of the two American banks. The central banks have agreed to expand their so-called dollar swap line which makes available large quantities of U.S. dollars to stabilize other vulnerable banks anywhere in the world. The central banks called the expanded swap line, “an important liquidity backstop to ease strains in global funding markets.”

To halt the growing sense of panic and re-assure those businesses and individuals with large, uninsured deposits in the two American banks that have already failed, the Federal Deposit Insurance Corporation (FDIC) has waived the normal $250,000 limit on insured deposits and agreed to guarantee depositors in those banks access to all of their money.

The FDIC has announced that New York Community Bancorp is taking over Signature Bank’s deposits and is re-opening its branches under the name of one of its existing divisions, Flagstar Bank. Flagstar is also buying some of Signature’s assets.


However, because a buyer for Silicon Valley Bank had not yet been found, its parent company filed for chapter 11 last week, creating the largest bankruptcy due to a bank failure since the collapse of Washington Mutual during the height of the 2008 financial crisis.

Last week, San Francisco-banked First Republic Bank became the next mid-sized American financial institution to face a flood of withdrawals by its depositors. The sudden loss of $70 billion in deposits, representing almost 40% of First Republic’s liquid assets, threatened its ability to meet its financial obligations. The run on the bank prompted S&P Global Ratings to cut First Republic’s credit rating, despite the fact that 11 of the nation’s biggest banks agreed last week to provide First Republic with $30 billion in emergency deposits to use as working capital.

Part of First Republic’s problems can be traced to the large number of jumbo mortgage loans it made when their interest rates had dropped to just 3.5%, which was not enough to cover the bank’s borrowing costs over the past year, due to the increase in interest rates.


Meanwhile, in Europe, after 167 years of independent operations, Credit Suisse, which was founded in 1865 to finance the expansion of Switzerland’s railroads, is being forcibly sold to its largest Swiss banking competitor, UBS. At its peak in 2007, Credit Suisse had a market value of $96 billion. It is now being sold for the bargain basement price of $3.1 billion in an all-stock deal, after 15 years of sub-par financial performance due to mismanagement by the bank’s officials. Its long decline began after it failed to update its risk management policies and business strategies after surviving the 2008 financial crisis in relatively good shape. The bank then suffered from a string of self-inflicted wounds, including constant changes in its business strategy, frequent turnovers among its top executives, spying and corruption scandals, large trading losses on risky investments as well as the financial failure in 2021 of two of its key clients.

Credit Suisse lost $120 billion in assets recent months because it had squandered the trust of its super-wealthy investors from around the world who had long been the bank’s mainstays. At the end, Credit Suisse was losing customer deposits at the rate of $10 billion a day. The most recent blow was an announcement last week by the chairman of the Saudi National Bank, which already owned almost 10% of Credit Suisse stock, that it had no intention of putting any more of its money into the bank. Even a new $54 billion line of credit provided by the Swiss National Bank early last week was not enough to assure that Credit Suisse would be able to survive until the financial markets closed for weekend.

On that Sunday, the Swiss National Bank announced an emergency, forced buyout of Credit Suisse by UBS, for about half of the total value of Credit Suisse bank stock at that time. To make the acquisition more palatable to Credit Suisse’s reluctant new owner, the Swiss National Bank agreed to provide UBS with more than $9 billion to backstop the expected losses it will likely incur from taking over and winding down Credit Suisse’s unprofitable investment banking operations, as well as more than $100 billion in additional liquidity for UBS to help it withstand any further difficulties due to the merger.

Despite it many troubles and mis-steps in recent years, Credit Suisse was still a global financial player At the end of 2022, it had a half-trillion-dollar balance sheet and around 50,000 employees worldwide, including 16,000 in Switzerland. It runs investment banking units serving wealthy clients in New York City, London and Singapore, as well as an operations hub near Raleigh, North Carolina.

For comparison, UBS has around 74,000 employees globally and a balance sheet roughly twice as large as that of Credit Suisse. After its merger with Credit Suisse is completed, the UBS balance sheet will be about the same size as those of Goldman Sachs or Deutsche Bank.

In announcing the takeover, Finma, Switzerland’s financial regulator, said Credit Suisse had experienced a “crisis of confidence,” and that there was “a risk of the bank becoming illiquid, even if it remained solvent. It was necessary for the authorities to take action in order to prevent serious damage to the Swiss and international financial markets.”


That news from Switzerland was welcomed by Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell. They also issued a joint statement declaring, “The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient.”

Whether these efforts by the Federal Reserve, the FDIC, the Biden administration, and the large commercial banks to stabilize First Republic and halt the spread of the crisis to other vulnerable regional banks are successful will determine whether additional private or federal government bailout assistance is needed.

Republican House Financial Services Committee Chairman Patrick McHenry told CBS News that urging major U.S. banks that are still financially healthy to buy up the smaller troubled lenders, as was done in the 2008 financial crisis, is one of the preferred ways to bolster the confidence of Americans in the financial system.

“I think all options should be on the table. That’s what I’m considering legislatively, that’s what I would encourage the administration to consider as well,” McHenry said.

Last week, the Mid-Size Bank Coalition of America sent a letter to bank regulators urging them to immediately guarantee all deposits in the U.S. for two years. In the letter, the group said depositors are pulling their money out of smaller banks and putting them into the nation’s four biggest banks, increasing the risk of a wider bank panic.

“Should another bank fail it is very possible that customer panic will set off a string of failures due to depositor bank runs regardless of the financial condition of the underlying banks,” the letter warned.


The banking crisis hit suddenly and took many investors by surprise because, for the first two months of 2023, the national and global economies seemed to be stronger than many experts had expected.

Inflation was still hot, at about 6%, but past its peak and seemed to be slowly easing. The labor market and consumer spending both remained strong, despite the higher prices and interest rates, and the financial system still seemed to be healthy.

Then, within a period of less than two weeks, the financial world was suddenly plunged into crisis, as the cumulative effects of fast-rising interest rates and poor risk management by the executives of certain banks finally became visible. This created a panic among their major depositors who responded by using their electronic access to their accounts to immediately withdraw their funds.

The sudden failures of SVB and Signature Bank were triggered, like falling dominoes, by the shutdown and liquidation earlier this month of crypto-currency (e.g. Bitcoin) lender Silvergate Capital Corporation.


The first casualty was SVB, which was known for its willingness to finance risky startup technology companies as well as its close connections to venture capital firms in California’s Silicon Valley.

SVB opened its first office in San Jose, California, in 1983, not far from the birthplace of future technology giants Apple, Oracle, and Atari, and was one of the few banks in the area willing to lend to the young companies and help them to demonstrate their potential for success. In 2001, after a costly foray into loans to the local real estate market, SVB renewed its original focus on tech industries, with whom it believed that its long history gave it an advantage over its banking rivals. The bank’s officers also built up their relationship with local venture-capital investors and entrepreneurs, and became experts in lending to those kinds of clients.

The bank marketed itself as a one-stop financial shop for the tech community, offering wealth-management services to successful tech company founders, banking services for startup firms as well as access to potential lenders at high-tech-oriented venture-capital firms.

SVB was also unusual because it urged its borrowers to keep most of their cash in SVB accounts, prompting concern by regulators as long ago as 2015 about the bank’s heavy reliance on the venture-capital and high-tech worlds for its deposits. In the end, those deposits exceeding the $250,000 FDIC insurance limit became the bank’s poison pill, leading to its sudden downfall, and catching almost everyone working for the company by surprise.


But the Federal Reserve’s bank regulators recognized the potential problem. In January 2019, they issued a written warning to SVB executives over the shortcomings of the bank’s risk-management systems. Eventually, supervisors at the Federal Reserve Bank of San Francisco, which oversaw Silicon Valley Bank, issued six citations known as “matters requiring immediate attention.” However, no further enforcement action was taken by the Fed to force the bank to remedy the problem, by assuring that it would have enough cash on hand to deal with trouble, such as a run on the 97 percent of the bank’s deposits which were uninsured by the FDIC.

There was another advance warning of potential trouble ahead a few months ago, when SVB’s parent company disclosed that, due to rising interest rates, the market value of the long-term bonds that it was holding was $15.9 billion less than their face value listed on the bank’s balance sheet. That meant that the bank’s total equity had effectively been wiped out, leaving its uninsured depositors totally unprotected.

That meant that the interest rate risk to the SVB’s depositors increased as its assets rapidly grew from about $70 billion in 2019 to $114 billion by the end of 2020, and then to about $209 billion by the end of 2021. That raises the obvious question of why the Fed’s bank regulators who were well aware of those risks in 2019 permitted the bank to grow so fast without addressing them.

SVB thrived during 2020 and 2021, along with its tech industry clients. Fueled by a flood of new deposits, SVB invested them in longer-term government-backed mortgage bonds and Treasury debt, which are usually safe investments. But last year, when the Federal Reserve began raising interest rates, those long-term bonds and Treasury debt turned into toxic financial liabilities for SVB, whose executives then failed to recognize the risk, leaving the bank vulnerable to a fatal but foreseeable run on its deposits.

Another contributing factor was the fact that the bank had no chief risk officer to spot the problem between April 2022 and January 2023, when the Fed was aggressively raising interest rates.


The Federal Reserve has now initiated an investigation into what went wrong with its oversight of SVB, but its findings will come too late to prevent the bank’s collapse and the damage done by the financial chain reaction that it set off. In the meantime, the regulators and directors of the Federal Reserve Bank of San Francisco are facing intense political blowback over their failure to address the problems at SVB in time to prevent the bank’s demise.

Democrat Senator Elizabeth Warren also blames Federal Reserve Chairman Jerome Powell for his “long record of failure involving” bank regulation, as well as changes enacted during the Trump administration to federal bank regulations. But Warren’s critics claim that the original regulations, if still in place, would not have prevented the collapse of the Silicon Valley Bank, and that Chairman Powell should not be held personally responsible for the failures at the Fed’s San Francisco regional office.

SVB’s sudden collapse has left its former clients in the technology and venture capital worlds wondering how a banking franchise that had so recently been the envy of the financial world could implode so quickly.

“We never thought a bank so successful could collapse so fast,” Paul English, a tech entrepreneur who has worked with SVB for two decades and whose nonprofit organization, Summits Education, had more than $2 million deposited at the bank when it failed, told the Wall Street Journal.


The fall of New York-based Signature Bank, which was also known for its risky loans, came next. Signature was founded in 2001 and grew quickly in recent years by combining its traditional commercial real-estate business with customized services for a variety of new clients ranging from entrepreneurs and law firms to taxi drivers and crypto companies who were deemed to be too small by its Wall Street banking rivals to bother with. Its successful development of new niche sectors of the banking business and its reputation for excellent customer service combined with a minimum of red tape made it very popular with investors and customers alike in the years following the 2008 financial crisis.

In 2018, Signature decided to get into the crypto-currency market by opening deposit accounts for crypto companies. It also built up a payment network that allowed its crypto customers to send dollars to each other quickly and conveniently. By early 2022, its crypto-currency clients accounted for 27% of Signature’s $109 billion in deposits. But much like SVB, the collapse of the crypto market in recent months proved to be its undoing. Also like SVB, the bulk of Signature’s deposits, amounting to $83 billion, were larger than the FDIC’s $250,000 insurance cap, prompting its crypto clientele to panic and drain the deposits from their Signature accounts for fear of losing them in the event of the bank’s failure.

The crisis came for Signature Bank on March 10, the same day that SVB collapsed, when Signature’s depositors were withdrawing their money so fast that the bank’s executives did not have enough time to complete the paperwork necessary to draw upon Signature’s existing $29 billion line of credit with the Federal Home Loan Bank of New York before the close of business at 6 p.m. that day. By then, Signature’s depositors had already withdrawn $17.8 billion from their accounts since that morning.

Nevertheless, according to the Wall Street Journal, the bank still had $4.54 billion in cash and another $26.4 billion in “marketable liquid securities,” as well as an additional $25.3 billion in borrowing capacity. That should have been enough to enable the bank to stay in business. But on Sunday afternoon, March 12, anticipating another run on the bank’s deposits when its doors opened the next morning, the Federal Reserve told Signature’s executives that it wouldn’t lend it any more money, and would not allow it to re-open for business.

Some of Signature’s executives and members of the board, including former Congressman Barney Frank, who co-authored the landmark 2010 Dodd-Frank bank reform legislation, disagreed with that decision. They believed that the bank did have enough liquidity to survive if the Federal Reserve hadn’t prematurely shut it down its line of credit, and the regulators from New York State’s Department of Financial Services who took possession of the bank did not directly dispute that point.

The New York agency claimed that the bank was shut down because it “failed to provide reliable and consistent data, creating a significant crisis of confidence in the bank’s leadership,” and “its ability to do business in a safe and sound manner on Monday.”


A Wall Street Journal editorial agrees with the conclusion of former Congressman Frank that Signature Bank was taken down as part of an ongoing campaign by the Federal Reserve, the FDIC and the federal Comptroller of the Currency to take down the cryptocurrency industry. The editorial cites as proof a statement issued by those three agencies on January 3 saying, that they “have significant safety and soundness concerns” about bank crypto exposure and would “closely monitor crypto-asset-related [risk] exposures.” The editorial also notes that “a few weeks later, the National Economic Council issued a policy statement discouraging banks from transacting with crypto clients.”

Therefore, according to the editorial, federal “regulators ironically fueled the liquidity squeeze that they are ostensibly trying to prevent by spooking Signature depositors about its crypto exposure. By making crypto politically toxic, they also concentrated crypto deposits at [vulnerable] banks like Silvergate and Signature,” setting them up to fail.

The Journal editorial concludes that “Signature made mistakes managing its balance sheet, but it shouldn’t be summarily executed because regulators have deemed some of their customers too politically toxic to exist.”

Frank said in an interview with Bloomberg Radio that the bank regulators seized Signature “to send a message to get people away from crypto. We were singled out to be the poster child for that message.”


The sudden failure of Signature Bank, almost immediately after the collapse of SVB, reinforced a growing sense of panic among investors; and prompted more of them to start dumping the stocks and bonds they were holding from all but the strongest of financial institutions across the United States.

Banking executives who had blithely assumed that their depositors would keep their money in their institutions despite the surge in interest rates were caught unprepared by the bank runs which unfolded at breakneck speed.

Investors who spent the past year worrying about whether the Federal Reserve’s higher interest rates to fight inflation would trigger a recession are now facing a whole new set of worries: Will the current government and private efforts to prop up the vulnerable regional banks contain the damage to the larger economy, or will the current banking crisis spiral into something much bigger, in the same way that the collapse of Lehman Brothers led directly to the 2007-08 global financial meltdown.

Just a few weeks ago, Torsten Slok, chief economist at Apollo Global Management, said he believed the economy was growing so fast that the expected recession due to higher interest rates might be avoided altogether. Now he and many other economists believe that the probability of a recession is much larger.

“The slowdown that the Fed has been trying to achieve for so long may come a lot faster than we thought just two weeks ago,” Slok said.


However, the bank collapses of recent days, signaling that a recession may be much more likely than previously thought, was not a total surprise to economists who have pointed to the inversion of the yield curve as a reliable indicator of trouble ahead for the economy in general and for banks in particular.

Typically, banks make most of their money by borrowing in the short term, at relatively low interest rates, from depositors and the federal government, and then lending that money for longer periods at higher interest rates in the form of home mortgages, car loans, or commercial financing for businesses. But ever since last July, shortly after the Federal Reserve began aggressively raising interest rates to rein in inflation, the normal relationship between shorter and longer term loans has been reversed.

What that means is that the effective interest paid by 2-year U.S. Treasury notes is actually higher than the effective rate paid by 10-year Treasury notes. As a result, banks have been losing money on their long-term loans because of their higher borrowing costs for short-term money.

To keep their institutions solvent during periods of yield inversion, banking executives typically seek to minimize their long-term lending in order to cut their interest cost losses and maximize their other sources of income, such as banking and brokering fees.

Similarly, during times such as the past year, when an economic slowdown was expected due to increasing interest rates, bankers need to be more careful in granting loans to start-ups and other businesses with a higher risk of failure in such an environment.


Nevertheless, Silicon Valley Bank was particularly generous in its support for risky “woke” businesses and organizations pushing the progressive ESG (environmental, social, and governance) and DEI (diversity, equity, and inclusion) initiatives. The bank also donated more than $73 million to the Black Lives Matter movement and other extreme leftist social justice causes. Some analysts said that SVB’s managers paid more attention to the bank’s anti-climate change and social justice missions than its financial health.

Signature Bank was known for its extensive lending support for crypto-currency-related businesses which suffered a serious setback due to the scandal surrounding the November collapse of the FTX crypto-currency exchange, due to the blatantly fraudulent activities of the exchange’s founder and former CEO, Sam Bankman-Fried.

The seeds of the current banking crisis had been planted fifteen years ago by the policies pursued by the Federal Reserve and other central banks in Europe. In an effort to hasten the recovery from the 2008 global financial meltdown, they artificially held down interest rates to near-zero, which encouraged bank lending to riskier enterprises in an effort to generate bigger financial returns.

But the onset of runaway inflation last year due to reckless Biden administration spending policies forced the Federal Reserve and other central banks to rapidly raise interest rates, increasing the costs of borrowing and lending. In light of these recent changes in basic global financial conditions, it should not have been surprising that these three banks, with their pre-existing problems, were the first to fail when subjected to the additional stress of rising interest rates and the prospect of slowing economic growth.


Cracks in the global financial system first emerged last fall when London’s financial markets were caught by surprise when the British government announced an unexpected series of deep tax cuts. That led to a meltdown in the so-called liability-driven investments held by many British pension funds which soon forced the Bank of England to launch an emergency intervention, the British government to cancel the tax cuts, and members of the ruling British Conservative Party to replace their prime minister.

When the crypto-currency market then imploded in November, it set the stage for the bank failures of recent weeks, and stoked the fears of more nasty financial surprises to come.

But until the failures of SVB and Sovereign Bank last week, few financial experts realized that so many of the mid-sized and regional U.S. banks were as vulnerable as they turned out to be.

“I don’t think that anyone on Wall Street would have expected nothing to happen with rates going from around zero toward 5%,” said Johan Grahn, a market strategist at AllianzIM. “Something was always expected to break. But like with everything else, before it happens, you don’t know what it will be.”


The first signs of trouble with U.S. banks came on March 8, when SVB Financial Group disclosed that it had suffered a $1.8 billion loss in selling some of its investments, and that it would try to raise capital to repair its balance sheet through a new public stock offering.

SVB’s largest depositors responded by pulling out their money, forcing the FDIC to step in and seize control of the failing bank on the morning of Friday March 10. But by then, investor fears of financial contagion had caused the share prices of other banks to begin to crater.

Investors began looking for other lenders who shared the same weaknesses that triggered SVB’s collapse: a heavy dependence on uninsured deposits which exceeded the FDIC’s $250,000 coverage cap, making it vulnerable to a bank run, and a large asset portfolio made up of government bonds and other securities that had fallen in value because of sharply rising interest rates, threatening the lender’s economic stability.

U.S. banking regulators had hoped to quickly resolve the crisis created by the collapse of SVB by finding another bank willing to buy it, with suitable government stop-loss guarantees. But when none of the larger banks showed any interest in buying SVB, U.S. regulators feared that the meltdown in bank share prices would continue when the stock markets re-opened on Monday morning, March 13. Therefore, that Sunday night, Biden administration officials and bank regulators announced that the FDIC would guarantee all of SVB’s deposits beyond the $250,000 cap, and would make the necessary funds available to support other banks whose depositors of over $250,000 feared for the safety of their money. Over that weekend, FDIC officials also took over Signature Bank, and pledged to make all of their depositors with more than $250,000 in their accounts whole as well.

The unprecedented decision by Fed Chairman Powell, Treasury Secretary Yellen, FDIC Chairman Martin Gruenberg, and White House National Economic Council Director Lael Brainard to unilaterally extend FDIC insurance coverage to wealthy depositors, venture capitalists, and startup businesses with more than $250,000 in SVB and Signature Bank has drawn sharp criticism from some Republican lawmakers. They accuse these Biden administration officials of engineering another taxpayer bailout for the benefit of their liberal political supporters in Silicon Valley and New York. Some claim that it is a first step towards the nationalization of the entire American banking system.

The limited expansion of FDIC insurance coverage did help to avoid a broader investor panic over bank safety, at least for a little while, although the crisis has continued to spread to other vulnerable mid-sized banks, such as First Republic.


Meanwhile, Thomas Hoenig, a former FDIC vice chairman, expressed his concerns about the precedent that was set by the decision to wave the $250,000 cap on FDIC deposit insurance for SVB and Signature Bank. “You now really have this issue of the government being the ultimate protector of all deposits,” Hoenig told the Wall Street Journal. “What you’ve done with very good intentions is you’ve removed market discipline as a preventative to unsafe and unsound [banking] practices.”

Financial experts warn that unlimited FDIC insurance for all bank deposits would create what is known as a “moral hazard,” by encouraging bank executives to take additional risks with their deposits, in the knowledge that FDIC insurance would then cover any losses.

Some economists argued that the expansion of the insurance coverage was justified by the urgent need to suppress the growing public concern over the stability of the banking system. Nevertheless, when markets re-opened that Monday morning, the shares of another regional U.S. lender, San Francisco-based First Republic Bank, had fallen sharply as well. That prompted some of the nation’s biggest banks, including JPMorgan Chase, Bank of America, and Wells Fargo, to announce a plan last Thursday, in consultation with Treasury Secretary Janet Yellen, to supply First Republic with an additional $30 billion in cash to help ease the fears of its uninsured large depositors.

However, that infusion of cash was not enough to stabilize First Republic’s stock price, which lost another 47% when the stock markets opened on Monday morning, March 20. As a result, JPMorgan Chase CEO Jamie Dimon launched a new conversation with his fellow big bank executives to find another way to salvage First Republic.


Even before SVB’s March 8th public admission that it had to raise more capital from investors, the bank’s troubles due to its financially unsound, politically driven lending policies had been on the radar of regulators at the Federal Reserve and the FDIC.

When the run on its deposits started, SVB turned first to the discount window at the Federal Reserve for an emergency short-term loan, secured by the pledge of suitable bank collateral. The crisis then deepened when SVB ran out of collateral available to use as security for the additional loans at the discount window it needed to cover the withdrawals by its largest depositors.

At that point, FDIC officials decided to temporarily shut down the bank, while Biden administration officials wrestled with the problem of keeping the problems at SVB from creating a crisis of confidence by depositors with uninsured funds at other banks across the country. When the panic then spread to depositors at Signature Bank, and large withdrawals began at about 20 other mid-sized banks, federal regulators and Biden administration officials realized that they had to intervene immediately and dramatically.

When the Federal Reserve and the Treasury Department faced a similar crisis during the 2008 financial meltdown, their solution was to arrange for the biggest private banks, such as JPMorgan Chase and Bank of America, to purchase the banks that were failing, such as Countrywide Financial and Washington Mutual. But this time, when the FDIC conducted an impromptu weekend auction for the financial assets of SVB, none of the big banks were willing to submit a bid.

Part of the problem was that there simply wasn’t enough time for the other banks to thoroughly examine SVB’s finances to decide what it was really worth before the stock markets in Asia were set to reopen Sunday night. That left Biden administration officials with just one viable option to prevent a potential 2008-scale financial meltdown, an announcement that FDIC insurance would be extended to cover all of the funds on deposit at the two U.S. failing banks.


Meanwhile, the crisis of faith in the future of these mid-sized banks has increased the pressure on the Federal Reserve to call a temporary halt to its interest rate increases, at least until the current uncertainty surrounding the safety of the banking system can be resolved. Many investors are also hoping that in light of the banking crisis, the Fed may decide to reverse course and start cutting interest rates during the second half of this year.

At the same time, the same investors have good reason to be worried about the possibility that there may be more mid-sized American and European banks whose vulnerabilities to the current high-interest rate environment have yet to be revealed.



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