The Looming Threat of Bank Failures and the Need for Proactive Regulation.

The liquidity crisis facing some small, midsize and regional banks could take years to resolve, leading to further upheaval and consolidation in the banking sector. Financial institutions face a tough environment in which to raise capital, sell off business lines or potentially merge to avoid failure. The potential for a long, slow trickle of bank failures and consolidation is made more likely if inflation persists and interest rates keep rising. Adding to the uncertainty is an expected downturn in commercial real estate valuations that could lead to writedowns and other problems.