Why has the interest rate hikes caused midsized banks to fail (3 so far) in the US but NOT small banks? Note: I know why the banks failed just why the reasons don’t seem to affect smaller banks!
In: 4
Small banks are equally at risk in this market. These other answers aren’t correct
All banks turn short turn deposits into longer term loans and profit on the differential rates.
Smaller banks tend to have less skilled management, weak modeling, and more concentrated depositor bases. JPMorgan and the fdic say that smaller banks also tend to be undiversified in their loan portfolios with 4.4x the exposure to commercial real estate and business loans. So, giant banks who also do investment banking or brokerage also have diversified income streams. (not that that is helping Schwab atm)
https://www.jpmorgan.com/wealth-management/wealth-partners/insights/risk-watch-the-composition-of-small-bank-loans
Jpm has been doing a series of articles reviewing the financial sector. It’s not a mystery as to why they’re gobbling the failing banks, as they ate the Bear.
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