A New York Bank Witnesses Billions in Deposit Flight as Fed Chair Warns of More Lender Collapses
A New York-based bank is experiencing a significant exodus of deposits, with billions of dollars being withdrawn. This comes as Federal Reserve Chair Jerome Powell issues a warning that more banks may collapse in the near future.
Deposits Plummet
New York Community Bank (NYCB) recently released its earnings report, which revealed a decline in total deposits. From the beginning of the year to March 6th, deposits fell from $81.365 billion to $77.2 billion – a drop of $4.165 billion in less than three months.
Concerns about Commercial Real Estate Exposure
The decline in NYCB’s deposits is linked to concerns about the bank’s exposure to commercial real estate and its overall balance sheet. The bank has made several acquisitions, including a majority stake in the failed Signature Bank.
Fed Chair Warns of More Collapses
Fed Chair Jerome Powell has expressed concern about the vulnerability of small and medium-sized US banks due to their exposure to the struggling commercial real estate market. He stated that more bank failures are expected in the coming years.
- Powell has identified banks with high concentrations of commercial real estate loans and engaged in dialogue with them about their capital, liquidity, and plans to address potential losses.
- The issue primarily affects smaller and medium-sized banks, rather than large banks.
- The Federal Reserve and other regulators are actively working with these banks to manage the situation.
Commercial Real Estate Concentration Ratio
NYCB’s commercial real estate (CRE) concentration ratio is approximately 477% as of Q3 2023, according to data from real estate intelligence firm Trepp. This ratio indicates the proportion of a bank’s loan portfolio that consists of commercial and multifamily mortgages, construction loans, and land loans.
- Banks with high CRE concentration ratios may face significant losses if borrowers are unable to make their loan payments.
Hot Take: More Bank Failures Expected as Deposits Plummet
A New York bank is witnessing a substantial decline in deposits, with billions of dollars being withdrawn in a short period. This comes at a time when Federal Reserve Chair Jerome Powell warns of more bank failures, particularly among small and medium-sized banks exposed to the struggling commercial real estate market. The situation highlights the challenges faced by banks with high concentrations of commercial real estate loans and the need for careful management of capital and liquidity. While larger banks are not considered at immediate risk, regulators are actively working with smaller banks to address the issues. As the industry continues to navigate these challenges, depositors may be prompted to consider alternative banking options.
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