Regional Bank Failures Shift Nationwide’s Underwriting Perspective
Although traditionally an underwriter of large institutions, Nationwide’s financial services practice sees the current uncertainty plaguing regional banks as a possible business opportunity. That being said, there is enough uncertainty in the banking environment these days to dictate a conservative approach.
When economic analysts look back on 2023, they’ll point to a series of small to midsize regional bank closures as a period of notable economic uncertainty.
During a five-day period, three banks collapsed for a variety of reasons — including overexposure to risky assets like cryptocurrency and concerns about liquidity — that led customers to rapidly withdraw their deposits. Federal Reserve economists warned that these failures could cause a mild recession in the latter half of 2023, CNN reported. Global bank stock prices declined, and the S&P Banks Select Industry Index was down more than 24% for the year as of May 19, 2023.
Many expressed concerns over the uninsured deposits — those over $250,000, which is past the FDIC’s insured limit — that made up a significant amount of funds at the banks that stumbled this spring.
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