BlueSky Thinking Summary

Gregor Matvos of Kellogg School contends that regional banking remains vulnerable despite the interventions.

Catastrophes like the Silicon Valley Bank, among others, are an unmistakable reminder of some of the realities: rising interest rates destroy values;

uncertainty over government guarantees for uninsured deposits prevails.

Run-rising risks persist in commercial-real-estate loans, 30% of many banks' assets, given high vacancy rates and refinancing difficulties.

Depositors demanding higher interest rates increase strain, impacting regional banks more than larger peers.

Matvos advocates stricter capitalization to stabilize the sector, citing potential losses of up to $80 billion if default rates on loans climb.

Some recent policy shifts are aimed at buttressing banks, but it has continued to elude how to sustain solvency and depositor confidence.

Further regulatory measures will be required to secure the future of the banking system.