Daily Management Review

Financial Crisis Could Start As A Result Of The Current Banking Upheaval


Financial Crisis Could Start As A Result Of The Current Banking Upheaval
The CEO of Australia and New Zealand Banking Group stated on Monday that the most recent upheaval in the international banking system had the potential to lead to a financial catastrophe, while it was too soon to forecast that one akin to the 2008 crisis would result.
The recent instability at banks that followed the failure of Silicon Valley Bank (SVB) and Signature Bank in the United States and the emergency takeover of Credit Suisse has authorities all over the world on high alert for its repercussions.
"It's a crisis for some obviously, but is it a financial crisis, who knows? Does it have the potential to be one? Yes, it does have the potential to be one," CEO Shayne Elliott said in an interview on the bank's website.
He referred to the global financial crisis that occurred about 15 years ago and sent the world's main industrialized countries into their deepest recession since the Great Depression in the 1930s when he stated it was premature to presume the current situation could lead to "another GFC."
Due in part to stricter lending criteria and a more resilient domestic economy, Australian banks did not experience as much hardship during the 2008 crisis as those in the United States and Great Britain.
"This is a different issue. This is really to do with the global war on inflation and how central banks are raising rates very quickly in order to combat that, and that has casualties," Elliott, the top executive at the country's no.4 lender, said.
Following the failure of startup-focused lender SVB, Australia's banking regulator said that it has increased bank monitoring in the country.
Having learnt from previous crises, Elliott argued that this time, international authorities have moved far more quickly to help banks.
"Having said all that, it's 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 through over a long period of time."

According to Rachel Slade, personal banking group executive at National Australia Bank Ltd., the second-largest lender in the nation, mortgage clients had begun to exhibit symptoms of pressure after 10 straight rate increases, but there had been no spikes in default rates as of yet.
As a result of its banks' solid capitalization, Australia, according to Treasurer Jim Chalmers, is in a good position to withstand some of the volatility. Last week, the Reserve Bank of Australia noted that the banks were "unquestionably strong."