The crises at SVB Financial Group’s Silicon Valley Bank and Credit Suisse Group AG are likely to spur scrutiny of small banks and potentially limit lending practices, Goldman Sachs Group Inc. Chief Operating Officer John Waldron said in an interview with the German newspaper, Handelsblatt.
The banking system is significantly more resilient today than in the past, given greater liquidity and better capitalisation for financial firms, but the latest problems will probably lead to stricter rules and higher capital requirements for smaller banks, which play “an important role in providing credit to the economy,” Waldron told the newspaper.
“Some smaller banks will need more capital and the smaller institutions in the US in particular will have to adjust to stricter regulation,” Waldron said in the interview. “As a result, they become more cautious about lending. This could have an impact on the real economy. Credit is becoming tighter, which in turn could damp economic growth.”
Billions of dollars of market value have evaporated from dozens of US and European banks since March 6, a period that’s seen the collapse of Silicon Valley Bank and the government-brokered emergency takeover of Credit Suisse by UBS Group AG. The deal came after Credit Suisse failed to regain investor and client confidence after a series of scandals and losses, which led to credit-rating downgrades and rising funding costs.
Also read: Mid-size US banks ask government to protect all deposits: report
Waldron told Handelsblatt that he expects market volatility to remain high in the short term.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.