While tight global financial conditions and a deteriorating economic growth outlook are unlikely to get major U.S. banks into serious trouble, smaller and mid-sized banks face non-negligible risks connected to their exposure to commercial real estate portfolios. Global interest rates have risen substantially over the past year, leading to tighter financing conditions, falling asset values and greater investor risk aversion in the United States (and elsewhere). Sri Lanka and Ghana defaulted on their sovereign debt in May 2022 and December 2022, respectively. From late September through much of October, a massive uptick in volatility in U.K. government bond markets forced the Bank of England to intervene to avoid a larger crisis. The crypto exchange FTX collapsed in November. Two mid-sized U.S. banks (Silicon Valley Bank and Signature Bank) then collapsed in early March, prompting U.S. authorities to intervene forcefully and guarantee all deposits. And on March 19, authorities in Switzerland...
