Qatar’s sovereign wealth fund, the Qatar Investment Authority (QIA), has held stakes in various American banks and financial institutions.
Up to 186 US banks could be at risk of collapsing, similar to the recent failure of Silicon Valley Bank (SVB), a study published by the Social Science Research Network has found.
The research suggests that these banks might face significant trouble if 50% of their depositors were to suddenly withdraw their funds.
The study, which comes in the wake of SVB’s collapse – the worst US financial institution failure since 2008 – presents a speculative scenario where each of these banks experiences a run.
The researchers concluded that, under such circumstances, the Federal Deposit Insurance Corporation (FDIC) would be unable to provide sufficient funds.
The economists behind the study warned of the potential risk of bank runs, stating that “our calculations suggest these banks are certainly at a potential risk of a run, absent other government intervention or recapitalisation.”
“Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk,” the study’s abstract reads. “If uninsured deposit withdrawals cause even small fire sales, substantially more banks are at risk.”
The vulnerability of these banks stems from their assets being tied up in government bonds and mortgage-backed securities, which have been negatively impacted by the Federal Reserve’s recent interest rate hikes.
SVB held a significant portion of its assets in long-term government bonds, which, despite being a safe long-term investment, had depreciated in value since their initial purchase. The bank also over-invested in longer-term mortgage securities with maturities exceeding 10 years.
In an effort to meet customer withdrawals, SVB sold these bonds at a staggering $1.8 billion loss. This disclosure prompted panic among depositors, leading to a mass exodus of funds from the bank.
“Overall, these calculations suggest that recent declines in bank asset values very significantly increased the fragility of the US banking system to uninsured depositor runs.” the study’s abstract concludes.
Qatar’s sovereign wealth fund, the Qatar Investment Authority (QIA), has held stakes in various American banks and financial institutions. However, the specific investments and the size of their holdings may have changed since due to market fluctuations and investment decisions.
QIA has invested in a wide range of industries, including banking, real estate, technology, and infrastructure, in the United States and other countries.