Another bank subsidy America should kill off:

The slow-burning crisis in America’s small- and medium-sized banks has entered its next phase. Nearly a year on from the failure of Silicon Valley Bank (SVB), New York Community Bank has lost about half of its value since it announced on January 31st that it was setting aside $552m to cover troubled loans secured against commercial real estate. Last spring the bank was a saviour of sorts, buying $38bn of assets from Signature Bank, which failed around the same time as SVB. Now it is the first example of a new set of problems facing the industry.

The good news is that commercial real estate is a smaller problem for banks than the losses on securities which brought down SVB and others. Lenders are protected by low loan-to-value ratios and not all commercial buildings are in trouble: it is rent-stabilised buildings and old, energy-inefficient office blocks that are suffering big write-downs. Banks that struggle will be those that are unusually exposed, or for which these losses are the last straw.

Source:The economist