Recently, the Federal Reserve (Fed) in the FOMC meeting maintained its monetary stance to set interest rates unchanged. The statement also put pressure on hundreds of small banks in the United States (US).
Christopher Wolfe, Managing Director of Fitch Ratings sees several banks on the brink of failure and some forced to lower their minimum capital.
Consulting firm Klaros Group surveyed about 4,000 banks in the US and found that 282 banks are facing problems in real estate lending and face potential losses from being tied to higher interest rates.
The majority of these banks are small lenders with assets of less than $10 billion.
In reality, most of the banks are close to bankruptcy and the possibility of the risk of collapsing will be greater. However, it does not mean that the community and customers are not affected by the pressure.
The firm also argues that communities may be affected in subtle ways because of bank closures or failures. Unless they choose to invest in new personnel technology innovation industries.
For some users, the failure will not have a large indirect impact on them.
In general, small banks often rely on financing to carry out their day-to-day operations. As interest rates rise, the cost of obtaining financing increases and affects their profit margins.
