Recent bank failures have caused analysts to both compare, and downplay, events against the 2008 Financial Crisis. Overall, the agricultural community sees said bank failures, takeovers and wider financial market conditions too optimistically, due partly to the lack of nuanced information about banks’ riskier practices and accounting against wider macroeconomic considerations.
After Silicon Valley Bank (SVB), Signature and Credit Suisse failed, input from cited Ag sector economists viewed them as non-systematic events caused by excessive tech sector risk taking prior to Fed rate hikes. That said, commentators also urged general fiscal caution for growers and stakeholders in managing balance sheets, considering the importance of farm credit and insurance regardless of outside conditions.
Calls for caution should thus be intensified, as levels of bank ownership concentration are unprecedented, while uninsured bank deposit levels remain worrisome, and financial derivatives risks persist. In its May 1st report on “Options for Deposit Insurance Reform,” the FDIC revealed that total uninsured domestic deposits held by all banks at Y/E 2022 was $7.7 trillion. Of that, just 4 banks – America’s largest – controlled $3.286 trillion of uninsured deposits at year-end 2022. Those 4 banks held 40% of all assets across 4,127 U.S. federally insured banks, alongside 43% of said uninsured deposits. On March 15th, the Wall Street Journal announced that said 4 banks had lost $91 billion in market value in a week, indicating contagion spreading from SVB, Signature and Credit Suisse.
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