US banking shock has potential to become a financial crisis, says ANZ boss

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“Every five to 10 years there’s something going on in the world. And so we shouldn’t be surprised, in a funny way, that things like this happen. It’s too early to call it – I mean, it’s a crisis for some, obviously – but is it a financial crisis, who knows? Does it have the potential to be one? Yes, it does,” he said.


Another difference in the current crisis was that regulators had acted much quicker to support banks, having learned lessons from the GFC, he said.

Global economies, corporations and households are all in stronger positions today than they were 16 years ago, and banks have higher levels of capital and liquidity which will help stem the fall-out.

The RBA’s assistant governor for financial markets, Christopher Kent, last week gave assurances that Australia’s banks had “unquestionably strong” capital and liquidity positions.

Elliott also expressed confidence in Australia’s banking sector, which he described as “really different”, with more stringent controls and processes than “elsewhere in the world”.

“Going into the GFC, remember there was a high degree of leverage sitting in the system, whether it was household or businesses, et cetera; that’s not the case this time,” Elliott said.

Deutsche Bank’s share price took a major hit last week.Credit:AP

“Having said all that, it’s clearly not over. I don’t think you can sit here and say, ‘Well, that’s all done, Silicon Valley Bank and Credit Suisse and, you know, life will go back to normal’.”

Jitters in global markets, as they wait for further intervention from US authorities and monitor the US Federal Reserve’s moves on interest rates, will be felt for some time, the bank chief warned. “History says it’ll take many, many months, if not a year, for these things to roll through the economy,” he said.

Investors are wary of a potential liquidity crisis among smaller and regional banks and Wall Street will be watching this week to see if the US Federal Deposit Insurance Corporation guarantees deposits for all banks, rather than just for those thought to be “systematically important.”

Elliot said regulation of the sector would likely be permanently altered by recent events to prevent similar shocks occurring in the future.

“Just like COVID, the world never went back to the way it was pre-COVID. Even with these things that are happening, and who knows where it’ll go, the future will never go back to the way it was, it will always be slightly different. And so we need to prepare for that new world,” he said.

“I can almost guarantee regulators around the world are thinking of new things they need to put in place to protect depositors and the economy from change going forward. And so there will be a whole bunch of things that we need to prepare for.”

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