Reuters reported that ANZ CEO Shayne Elliott said on Monday that the latest turmoil in the worldwide banking system could start a financial crisis. But it is early to predict whether it could bring a financial crisis similar to 2008.
Authorities around the globe are on high alert for the fallout. This is from the recent turmoil at banks that followed the collapse of SVB or Silicon Valley Bank and the Signature Bank in the USA. The takeover of Credit Suisse added to it.
CEO Shayne Elliott commented in an interview that it is a crisis for some, but is it a financial crisis? He said that it has the potential to be a financial crisis.
But, he said it was still premature to think that the present condition could result in another global financial crisis. He said this referring to the global financial crisis 15 years ago. It brought the major advanced economies of the world into their worst recession.
Australian banks did not suffer as those in the U.S. A. and Britain in the 2008 financial crisis. This was because of the tighter lending standards and a resilient home economy.
Elliott said that the present one is a different problem. The whole scenario is related to the global war on inflation. The central banks are raising rates quickly to combat that, which has, in turn, led to problems.
The banking regulator of Australia, soon after the fall of SVB, said that it intensified supervision of the local banking industry and also sought better information on the probable impact.
Global regulators acted quicker to support banks now, which is because of the lessons they learned from the prior crises.
The head of retail banking at National Australia Bank Ltd, Rachel Slade, told the Australian Financial Review on Monday that the mortgage customers started showing 1st signs of strain after ten rate rises. However, there was no rise in defaults.
Jim Chalmers, Treasurer of Australia (Albanese government), said Australia was in a good position against some volatility. This is because its banks were well-capitalized and also has strong liquidity.
The US banking crisis and market at the present
In context to the U.S. economy, the banking crisis threatened to upset many people, and people fear about their financial stability.
On financial analysis, usually, when stocks fall down, people tighten their spending. In turn, a decline in consumer spending slows retail sales. That further affects the market conditions.
Similarly, income is less now due to inflation. The interest rates are going up. Further, Jerome Powell, Federal Reserve Chair, said that the turmoil in the financial sector shall cause the banks to tighten their lending standards.
This can leave consumers with less access to cash. Plus, there is the rising cost of housing, food, and other expenses.
Any money earnings less than the inflation rate shall lose purchasing power over time.
The annual Modern Wealth Survey by Charles Schwab said that Americans now claim they need an average net worth of $ 774,000 to feel financially comfortable but above $ 2 million to feel wealthy.
Today, fewer consumers plan to buy a car or a home or spend money on a vacation or a major appliance. Also, there are fears of recession. There are debates about whether the country is going into recession. But, many economists expect it to occur in the 2nd half of the current year.
However, because of a strong labor market, the economy remained much resilient.