Shark Tank’s Kevin O’Leary says the US banking system is set for a period of major consolidation after a loss of confidence in the financial sector.
In a new Fox News interview, the venture capitalist says the number of regional banks in the US will likely drop by half in the coming years.
“We have 4,100 regional banks in America. Probably in the next three years, it will be down to 2,000. They’re going to consolidate…
People are very nervous about putting their money in the bank because if another one fails and you have your cash in there, right now you’re only guaranteed for $250,000.”
O’Leary’s prediction comes as new data shows depositors have pulled money out of the US banking system for five consecutive quarters.
According to Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg, total deposits went from $18.7 trillion at the end of Q1 to $18.6 trillion at the end of Q2 – a drop of $100 billion on a quarter-over-quarter basis.
Although the pace of deposit flight has slowed, Gruenberg says Americans continue to withdraw funds from banks to seek other opportunities that generate higher interest.
“Total deposits were $18.6 trillion, down 0.5 percent quarter over quarter, a reduction from the 2.5% decline reported in the first quarter.
In the second quarter, we observed the continuation of the trend in which customers are actively seeking higher yields.
Lower-earning accounts such as transaction, money market deposit, and other savings accounts declined by $412.8 billion during the quarter, while time deposits increased by $306.7 billion.”
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