From CNBC: 2024-03-19 18:13:09

Hundreds of smaller banks face challenges after the collapse of three regional lenders in March 2023. Slow merger activity leaves many vulnerable to potential losses on commercial real estate.

282 U.S. banks with high commercial real estate exposure and unrealized losses are at risk, according to a study by Klaros Group. New York Community Bank, with over $100 billion in assets, is among those facing challenges.

Regulators are pushing banks to raise capital or merge with stronger institutions to avoid insolvency. Powell warns of future bank failures due to mounting stress among small and medium-sized banks impacted by commercial real estate losses.

After multiple bank failures in 2023, many anticipated a wave of consolidation to help deal with increased costs. However, few deals have materialized as bank executives fear regulatory hurdles and scrutiny.

Aging CEOs and the need for banks to scale up could drive increased merger activity. Challenges like deep bond and loan markdowns have eased, leading to a potential uptick in bank mergers this year. Regulatory changes post-presidential election could impact future bank consolidation efforts.

Read more: Where cracks in the banking sector may appear without more M&A