US Regional Banks’ Crisis is Far From Over

US regional banks continue to grapple with the same underlying problems that triggered the crisis, i.e., valuation losses on fixed-income investments, increased cost of deposits, and high levels of uninsured deposits. Increased deposit outflows tightened the liquidity of the banks, making them more reliant on borrowings from the Federal Home Loan Banks and Bank Term Funding Program facility. Moreover, regional banks have high lending exposure to commercial real estate, making them vulnerable to significant headwinds faced by the sector.