'Shark Tank' Star Kevin O'Leary Sounds Alarm About Cracks In Regional Banks Amid Rising Interest Rates

A brewing storm in commercial real estate may spell disaster for the banking system, according to “Shark Tank” star and small business investor, Kevin O’Leary.

As reported by Business Insider, O’Leary expressed concerns about the commercial real estate and U.S. office market, highlighting the all-time high office vacancies as the work-from-home trend persists. This could pose significant problems for the sector, which is said to have about $1.5 trillion in maturing debt over the next few years.

Morgan Stanley predicts that commercial real estate prices could plummet by up to 40%, potentially impacting regional banks, which hold 68% of all commercial real estate loans, as estimated by Bank of America.

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In a recent interview on Fox Business, O’Leary warned of the possible demise of regional banks as the sector undergoes a “metamorphosis”. To mitigate the broader effects of a bank failure, he suggested that the U.S. should expand its deposit insurance for payroll accounts.

O’Leary proposed a 24-month insurance policy on up to $100 million in bank deposits, with no additional interest on the accounts, to bolster confidence in the banking sector.

Despite fears easing following the collapse of Silicon Valley Bank earlier this year, some commentators remain worried about the stability of the U.S. financial system. The SPDR S&P Regional Banking exchange traded fund has continued to struggle, with shares dropping 30% since the beginning of the year.

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