In this article, we’re answering “What banks are in trouble?” and taking a close look at the indicators you can use to decide whether a bank is financially sound.
This is an important consideration for anyone looking to move money abroad, whether they are from a stable jurisdiction like the US or a far less stable jurisdiction like Venezuela or Lebanon.
We will discuss the non-financial indicators that you can consider to identify risky banks, along with the factors that can determine if a bank is right for you or your business or not.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- What Banks Are in Trouble?
- Factors to Consider Before Choosing a Bank
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
What Banks Are in Trouble?
Banks that are in trouble are generally those dealing with troubled assets and non-performing loans. In most cases, these banks are already under regulatory scrutiny and bank regulators may be preparing to intervene.
Unfortunately, during a period of systemic risk and financial distress, the default risk for financial institutions rises. This means the likelihood of bank failures increases as well, which understandably sparks fears of a widespread banking crisis.
With this in mind, we always suggest maintaining deposits below the insured threshold at banks. Not surprisingly, this number varies from country to country, and it can even vary from bank to bank. It’s also important to note that certain nationalities (e.g. Americans) will have annual reporting requirements when they have financial accounts that meet certain thresholds. So, don’t forget to confirm your reporting obligations prior to banking overseas.
In certain instances, the amount insured will be the standard amount, which is USD 250,000 in the United States. However, certain banks operate sweep accounts, which provide the ability to hold deposits of up to several million dollars and continue to benefit from depositor insurance.
On the other hand, during the 2008 crisis, the United Arab Emirates (UAE), decided to insure 100% of all deposits in the banks, including those deposits held by foreign non-resident individuals.
Factors to Consider Before Choosing a Bank
Before choosing a bank, there are a number of important factors to consider, not the least of which is the financial health of the institutions you’re considering. However, there are other important factors to consider as well, which can also indicate whether a bank is (a) financially stable, (b) suitable for your client profile, or (c) in a country where you should consider banking.
The non-financial factors to consider before choosing a bank that can indicate whether a bank is stable include the bank’s reputation, its willingness to onboard high-risk clients, the citizenships and residencies that it caters to, its correspondent bank relationships, and more.
The factors to consider before choosing a bank that can influence whether a bank is suitable for your client profile include their willingness to onboard you or your company, their deposit requirement, and whether they offer the services you need.
Lastly, the factors to consider before choosing a bank that can indicate whether the bank is in a suitable country include whether the country is blacklisted, is economically strong, politically stable, and has a strong currency that can be exchanged internationally.
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Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into what banks are in trouble. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
How Many US Banks Are in Trouble?
It is impossible to know how many banks are at risk currently in the United States or elsewhere. This is because banking financial reporting lags, providing a snapshot of historical data. In other words, by the time bank financials are available, the situation may be very different. With this in mind, it’s important to open accounts where you feel comfortable with the risk, management, business model, and much more.
Which Banks Are at Risk?
Generally speaking, it is impossible to say which banks are at risk. However, there are two key metrics that our team generally looks at to consider the health of a bank, which include the capital adequacy ratio and the liquidity ratio. In short, these two ratios determine the bank’s risk-adjusted assets and total liquidity on hand to meet short-term obligations.
What Major Banks Have Collapsed?
The five major banks that have collapsed since 2008, in order of size of failure, include Washington Mutual Bank ($307 billion), First Republic Bank ($212 billion), Silicon Valley Bank ($209 billion), Signature Bank ($110 billion), and IndyMac Bank ($31 billion). These five banks represent $869 billion in total.
Who Are the 3 Banks That Failed?
The three banks that failed in March of 2023 included Silicon Valley Bank (SVB), First Republic Bank (FRB), and Signature Bank. These three banks triggered fears of a systemic global banking crisis, which was further propelled by the failure of Credit Suisse in the same month.
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