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An event-driven bank stress indicator: The case of US regional banks

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  • De Rezende, Rafael B.

Abstract

Financial markets have been shaken by the surge of a banking crisis in early 2023. The failure of Silicon Valley Bank has raised concerns about the health of various financial institutions in a period of rapid monetary contraction and high interest rates. I discuss the stress levels of sixty US regional banks, by proposing a new “bank stress indicator”, based on an event study framework. The indicator suggests six highly stressed banks: First Republic Bank, Western Alliance Bancorporation, KeyCorp, Comerica Incorporated, Zions Bancorporation and PacWest Bancorp. Although most of these banks have been highly profitable and have built solid balance sheet positions over the past years, they have faced large shares of uninsured deposits, which have put them at risk. The new Bank Term Funding Program launched by the Fed is designed to help in this matter, lowering the risk of new failures.

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  • De Rezende, Rafael B., 2023. "An event-driven bank stress indicator: The case of US regional banks," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323005044
    DOI: 10.1016/j.frl.2023.104132
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    1. Elisabetta Montanaro, 2023. "La vigilanza bancaria. Storia, teorie, prospettive di Lorenzo Esposito e Giuseppe Mastromatteo: un articolo di recensione (La vigilanza bancaria. Storia, teorie, prospettive by Lorenzo Esposito and Gi," Moneta e Credito, Economia civile, vol. 76(302), pages 133-153.

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    More about this item

    Keywords

    Bank distress risk; Bank stress indicator; Monetary policy; Financial stability; Banking crisis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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