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IPC Community Exclusive: The Ongoing Banking Crisis
July 18, 2023 | Shawn DuBravac, IPCEstimated reading time: 1 minute
On May 1, First Republic Bank became the latest addition to the growing list of failed banks, making it the third major bank to collapse in recent months. Previously the 14th largest bank in the United States, First Republic Bank now holds the unenviable title of being the second largest bank failure in U.S. history. Silicon Valley Bank, which was the 16th largest bank in the country, and Signature Bank, the 29th largest bank in the U.S., also collapsed recently. These two bank failures mark the third and fourth largest bank collapses in history. Since the 1970s, more than 90 banks with assets over $1 billion have failed in the United States. Three of the four largest collapses have occurred in the past few months.
In light of recent U.S. bank failures and a significant surge in interest rates, depositors have hastened withdrawals from commercial banks. Bank deposits have fallen about 3.5%, or over $600 billion, since the start of the year. Small banks have seen deposits decline roughly 4.4%, or nearly $250 billion, since the beginning of the year.
Depositors have been moving bank deposits from low-interest-bearing bank deposits to money market funds which offer higher yields. Money market holdings have risen over $160 billion since the start of the year and are up nearly $400 billion since the Federal Reserve began raising rates in early 2022. The effective Federal Funds rate has risen nearly 500 basis points since the Federal Reserve began raising rates in March 2022. Money market rates have risen sharply over this time while interest rates for savings accounts have remained muted. The spread between interest-bearing bank deposits and money market funds is likely to remain wide and, as a result, deposit outflows are unlikely to reverse.
The outflow of deposits limits both the ability and willingness of banks to offer loans. Moreover, financial institutions are becoming more cautious given both the volatility in the banking system and the broader economic uncertainty. Banks are reporting tighter lending policies and this trend is likely to continue in the months ahead as their risk tolerance continues to diminish.
To read the rest of this article, which appeared in the Summer 2023 issue of IPC Community, click here.
Suggested Items
North American EMS Industry Down 4% in March
04/29/2024 | IPCIPC announced the March 2024 findings from its North American Electronics Manufacturing Services (EMS) Statistical Program. The book-to-bill ratio stands at 1.31.
Real Time with… IPC APEX EXPO 2024: A Global Presence in PCB Manufacturing
04/29/2024 | Real Time with...IPC APEX EXPORob DiGiovanni, VP of sales for the Americas at STARTEAM Global, discusses the company's global presence in PCB manufacturing. As he explains, the firm operates facilities across Europe, Asia, and North America, specializing in serving contract manufacturers in the automotive and medical industries. They emphasize quality and meeting OEM standards, focusing on offshore supply and non-Chinese factories in the North American market. The company has grown through acquisitions and rebranding to offer multiple products.
EIPC Issues Letter of Urgency
04/29/2024 | Alun Morgan, EIPCAlun Morgan, president of EIPC, issued a letter last week in an effort to raise awareness of the state of PCB manufacturing in Europe. He writes, "The European PCB manufacturing industry and its supply base has been steadily shrinking since the dot com crash at the start of the millennium. European demand for PCBs and assemblies has, however, continued to grow, thus creating an ever-widening gap between European domestic capacity and consumption. The risks posed by this imbalanced supply and demand pattern came into sharp focus during the Covid-19 pandemic which caused chaos in extended supply chains across the world and resulted in widespread shortages."
Arlon Electronic Materials Awarded Requalification to IPC-4101 QPL for All Polyimide Specification Sheets
04/29/2024 | IPCIPC's Validation Services Program has awarded Arlon Electronic Materials Division, an electronics material manufacturing company headquartered in Rancho Cucamonga, Calif., an IPC-4101 Qualified Products Listing (QPL) requalification for the third time.
I-Connect007 Editor’s Choice: Five Must-Reads for the Week
04/26/2024 | Andy Shaughnessy, Design007 MagazineIn this week’s roundup, we have a variety of articles covering everything from design through assembly, and even box build. I’ve always wondered whether box build was all it was cracked up to be. Do customers really pick one EMS provider over another because one company offers box build? And if you’ve ever wanted to volunteer, IPC’s Thought Leaders Program is looking for a few good technologists to help them on their mission. Check out Stanton Rak’s article, which was published in the spring issue of IPC Community.