Shayne Elliott says it’s “premature” to say Silicon Valley Bank, Credit Suisse woes will trigger a repeat of the 2008 crisis.
The head of the Australia and New Zealand Banking Group says the latest turmoil in the global banking system has the potential to spark a financial crisis, though it’s too early to predict whether it could lead to a repeat of 2008.
Authorities around the world are on high alert about the implications of the recent banking turmoil following the collapse of Silicon Valley Bank (SVB) and Signature Bank in the US and the emergency takeover of Credit Suisse.
“Of course it is a crisis for some, but is it a financial crisis, who knows? Does it have the potential to be one? Yes, it has the potential to become one,” CEO Shayne Elliott said in an interview on the bank’s website.
But he said it was premature to believe the current state of affairs could lead to “another GFC,” referring to the global financial crisis some 15 years ago that plunged the world’s major advanced economies into their worst recession since the Great Depression in the 1930s.
Australian banks did not suffer as much as those in the US and Britain during the 2008 crisis, thanks in part to tighter credit conditions and a more resilient domestic economy.
“This is another issue. This really has to do with the global war on inflation and how central banks are raising rates very quickly to counter that, and that has taken casualties,” said Elliott, the chief executive of the country’s No. 4 lender.
Australia’s banking regulator said shortly after the collapse of startup-focused lender SVB that supervision of the local banking sector had intensified and was seeking more information on the potential impact.
Global regulators have acted much more quickly this time around to support banks, having learned lessons from the previous crises, Elliott said.
“Having said all that, it is clearly not over. I don’t think you can sit here and say, ‘Well, that’s all done, Silicon Valley Bank and Credit Suisse and, you know, life will go back to normal’. These things tend to roll over a long period of time.
Rachel Slade, head of retail banking at National Australia Bank, the country’s second-largest lender, told the Australian Financial Review on Monday that after 10 consecutive rate hikes, mortgage customers were beginning to show the first signs of tension, but no spikes yet. in case of defaults.
Treasurer Jim Chalmers said Australia was well placed to cope with some of the volatility as banks were well capitalized and had strong liquidity.
