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Expert comment on the current banking sector volatility

Will we see stability return to the banking sector?

Posted: 22nd March 2023 by Mark Palmer
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Lindsay Johnston, Partner, Banking and Capital Markets, Infosys Consulting:

“It’s unlikely we are at risk of a rerun of the previous financial crisis. Banks in general are much better capitalised than they were in 2008 and this includes Credit Suisse, which had a capital ratio (CET1) of 14%, well above regulatory minimums. The UBS deal announced yesterday is good for Credit Suisse, UBS shareholders and the market in general and was achieved in a timely fashion thanks to SNB intervention. I think we anticipated a fall in bank stocks this morning, which seems to have stabilised now.

We anticipate that current volatility levels in the banking sector will continue in the short to medium term as the impact of higher interest rates feed through the financial system. However, we do not see a looming banking crisis in the US or Europe on the horizon, given the generally higher capital and liquidity ratios compared to 2008.

The interventions on Silicon Valley Bank, Credit Suisse and other US regional lenders seem to have calmed the markets and although there may be more fallout to come amongst the smaller players, we expect contagion to be limited. Expect banks to be investing significantly in risk management and reporting functions over the next few months.”

 

LONDON, UK - JANUARY 30, 2016: Logo or sign for Credit Suisse Bank on side of office building in Canary Wharf, Docklands, London, England

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