Getty Images
- Banks are facing a lot of risks right now — but the danger isn't from SVB's collapse, the IIF's head said.
- Look instead to central banks' interest-rate hikes and geopolitical tensions, Tim Adams told CNBC.
- "The downside risks are real and we just don't know how deep they are," the finance industry group CEO said.
Banks are facing a lot of risks right now — but the biggest threat lies in central banks' rate-hike campaigns and geopolitical tensions rather than in the collapse of Silicon Valley Bank, according to the CEO of the Institute of International Finance.
"I think it is not a crisis. I think it was market turbulence," Tim Adams told CNBC on Tuesday, referring to the turmoil that rocked regional US banking stocks in March after the failures of SVB and Signature Bank. "It was really just a few isolated, idiosyncratic institutions.
The vast majority of the thousands of banks in the US and across the world "opened their doors in the past month and had no problems whatsoever," said Adams, whose organization represents financial institutions from around the world.
"It has subsided, it has stabilized — but we need to be vigilant and we need to watch for other stresses in the system."
The IIF boss believes that a combination of rising borrowing costs and geopolitical tensions pose a greater threat to lenders than the recent turmoil, which he said was unlikely to lead to deep soul-searching for markets.
"There are risks, there are geopolitical risks, which we can talk about. But the downside risks are real, and we just don't know how deep they are," he said.
"The Fed's gonna probably tighten again. We have other central banks in Europe, in the UK, tightening. So there are risks to the downside."
SVB's collapse last month following a historic run on its deposits marked the biggest bank failure since the 2008 financial crisis, with news of its failure sparking a rapid selloff in regional bank stocks.
"I do think we need to better understand what went wrong in certain institutions like SVB. I think we do need to ask what happened to supervision, but I don't think we're gonna see regulatory changes,"Adams said.
SVB held long-dated bonds that plunged in value because the lender had bought the assets at a time when interest rates were relatively low, before the Fed's aggressive monetary tightening campaign over the past year fueled a fixed-income sell-off.
Other regional lenders like First Republic and Western Alliance have also seen their share prices tank since SVB's collapse as analysts assess what impact the Fed's rate hikes will have had on their balance sheets.
Adams added that he's also worried about the global geopolitical situation – in particular, the deteriorating relationship between the US and China, and Russia's ongoing war in Ukraine. He believes these are graver threats to stability than the turbulence from high-profile collapses.
"The US-China relations are pretty tense, and I worry are going to continue to deteriorate for political reasons on both sides which are self reinforcing," he said. "The war in Ukraine continues and appears to accelerate."
from Business Insider https://ift.tt/Pr0Roqa
No comments:
Post a Comment