The CEO of Australia and New Zealand Banking Group said on Monday that the new turbulence in the global banking system had the potential to spark a financial catastrophe, though it was too early to say whether it would be comparable to the 2008 financial crisis.
Regulators throughout the globe are on high alert for the repercussions of the recent instability in the banking sector, precipitated by the failure of Silicon Valley Bank (SVB) and Signature Bank in the United States and the emergency takeover of Credit Suisse.
“Clearly, there is a crisis for some, but is it a financial crisis? Has it the capacity to become one? It has the potential to be one, yes “The bank’s CEO Shayne Elliott stated in an interview posted on the bank’s website.
First Citizens Bank will purchase SVB’s deposits and FDIC loans.
However, he stated that it was premature to presume that the present situation may lead to “another GFC,” alluding to the global financial crisis that occurred around 15 years ago and put the world’s main industrialized countries into their worst recession since the Great Depression.
During the 2008 financial crisis, Australian banks fared better than those in the United States and the United Kingdom, due in part to stricter lending regulations and a more stable domestic economy.
“This is a separate issue. This has to do with the worldwide battle on inflation and how central banks are rapidly raising interest rates to combat it, resulting in fatalities “Elliott, chief executive officer of the nation’s fourth-largest lender, said.
Soon after the failure of the startup-focused lender SVB, the Australian banking regulator signaled that it had increased monitoring of local banks.
Elliott stated that, having learned from past crises, global authorities had responded much more quickly to help banks this time.
FDIC will sell the deposits and loans of SVB to First Citizens Bank.
“Despite all of this, it is obviously not over. I don’t believe you can sit here and say, “Oh, it’s over, Silicon Valley Bank and Credit Suisse, and things will return to normal.” These things typically occur over an extended period of time.”
Rachel Slade, personal banking group executive of the country’s second-largest lender, National Australia Bank Ltd, told the Australian Financial Review on Monday that mortgage clients had begun exhibiting the first indications of pressure following 10 consecutive rate hikes, although defaults had not yet spiked.
Australia is in a good position to withstand some of the volatility, according to Treasurer Jim Chalmers, since its banks are adequately capitalized, and the Reserve Bank of Australia said this week that the institutions are “unquestionably solid.”