UBS Says Private Bankruptcy Filings This Year Have Surpassed The Peak Set In The Early Stages Of The Pandemic
Warning signs of a potential credit crunch were flashing even before Silicon Valley Bank’s stunning collapse. United Bank of Switzerland is saying private bankruptcy filings for small businesses in 2023 have already surpassed pandemic levels.
Financial markets this month were whipped around after the biggest bank failure since the global financial crisis. The failure of Silicon Valley Bank highlighted worries about the impact of tighter credit conditions for American businesses.
So far in 2023, private bankruptcy filings have outstripped a peak set in the early stage of the COVID pandemic by a wide margin.
Bankruptcy hot spots include the real estate industry. As a result, real estate industry BKs have led this year’s increase in private bankruptcy filings. UBS also warned that the healthcare industry is another industry facing credit stress. These two sectors could impact US labor markets. UBS also raised concerns about the chemicals and retail industries. In addition, the Swiss Bank also raised concerns about the financial sector and restaurant industry.
The FDIC is facing more than $20 billion in costs after coming to the rescue of Silicon Valley Bank and Signature Bank. These failures are stoking concerns that other small banks will come under liquidity stress. Thus, they will pull back on lending to businesses and retail clients.
Regional and small banks are critical to small and medium-sized businesses as they hold 40% of loans and debt at those companies.
Industry insiders say they are concerned that the BK filings will spill into the labor market.
Federal Reserve Bank of Minneapolis President Neel Kashkari said this week that it was too early to determine the impact of SVB’s implosion.
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