September 24, 2023

Shane Elliott says it’s “premature” to say that Silicon Valley Bank and Credit Suisse’s troubles will cause a repeat of the 2008 crisis.

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The head of the Australian and New Zealand banking group says the latest turmoil in the global banking system could trigger a financial crisis, although it is too early to predict if this will lead to a repeat of 2008.

Authorities around the world are on high alert in the aftermath 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.

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“Obviously this is a crisis for some, but is it a financial crisis, who knows? Does he have the potential to be one of them? Yes, it has the potential to be one of them,” CEO Shane Elliott said in an interview on the bank’s website.

But he said it would be premature to suggest that the current state could lead to “another global financial crisis,” referring to the global financial crisis about 15 years ago that plunged the largest advanced economies into their worst recession since Great Depression of the 1930s.

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Australian banks were not hit as hard as US and UK banks during the 2008 crisis, thanks in part to tighter lending standards and a stronger domestic economy.

“That’s a different issue. It really has to do with the global war on inflation and how central banks are raising rates very quickly to fight it, and it’s causing casualties,” said Elliott, a top manager for the country’s fourth lender.

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The Australian banking regulator, shortly after the collapse of startup-focused lender SVB, said it had increased its oversight of the local banking industry and requested more information on the potential impact.

Global regulators have moved much faster this time around to support banks, drawing on lessons from previous crises, Elliott said.

“Having said all this, it is clear that this is not the end. I don’t think you can sit here and say, “Well, it’s done, Silicon Valley Bank and Credit Suisse, and you know, life will return to normal.” These things tend to repeat over a long period of time.”

Rachel Slade, head of retail banking at the National Bank of Australia, the country’s second-biggest lender, told the Australian Financial Review on Monday that mortgage clients have begun to show the first signs of strain after 10 consecutive rate hikes, but there have been no peaks in defaults yet. .

Treasurer Jim Chalmers said Australia is in a good position to weather some volatility because its banks are well capitalized and have strong liquidity.