Bank turmoil was not a crisis, but ‘downside risks are real’, warns IIF boss

Tim Adams

Anjali Sundaram | CNBC

According to Tim Adams, CEO of the Institute of International Finance, the banking sector turmoil that led to multiple lender failures is not a systemic crisis and is now subsiding.

of The collapse of Silicon Valley Bank Early March, the biggest bank failure since the global financial crisis, sparked a wave of market panic that swept through the European and US sectors.

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The escape of shareholders and depositors credit suissewith the Swiss authorities 167-year-old Facility Emergency Rescue Intermediation by domestic rivals UBSMore.

the smaller one Signing bank closed by regulator Meanwhile, Wall Street giants intervened $30 billion in First Republic depositslocal lenders buy time to establish a survival plan.

Since then, many have concluded that the market has stabilized and that the problem is specific to the affected bank and does not pose a systemic risk. However, spillover effects are weakening the economic outlook in many advanced economies.

Speaking to CNBC on the sidelines of the International Monetary Fund (IMF) Spring Meetings in Washington, D.C. on Tuesday, Adams said the March turmoil was “a period of market turmoil or turbulence,” but that dismissed the idea that was a ‘crisis’.

“There are over 4,000 banks in the US, about 10,000 banks that are part of SWIFT worldwide, and 35,000 financial institutions worldwide. was. [it’s] It’s really just a few isolated and idiosyncratic institutions,” Adams told CNBC’s Jumanna Versace.

“So I think this was a market turmoil, not a crisis.

The IIF is the global trading body for the financial services industry, with approximately 400 members in over 60 countries. Adams said the main concern among members was downside risks to growth, especially in advanced economies.

The IMF on Tuesday cut its five-year global economic growth forecast to about 3%, marking the lowest medium-term forecast since 1990 in the IMF’s World Economic Outlook report.

Pierre Olivier Gourintjas, chief economist at the DC-based financial institution, told CNBC on Tuesday that turmoil in the banking sector has weakened growth prospects. Vulnerability.

“There are risks. We can talk about geopolitical risks, but the downside risks are real and the depth is unknown,” Adams said.

“The Fed will probably tighten again. Other central banks in Europe and the UK are also tightening, so there are downside risks.”

US and European regulators have taken swift action to quell contagion risks in the face of last month’s various bank collapses. But U.S. Treasury Secretary Janet Yellen argued Tuesday that the banking system is well-capitalized and has ample liquidity.

Adams said many of the regulators he spoke to, including those involved in the development of Dodd Frank and the Basel III framework in the aftermath of the financial crisis, did not believe that significant regulatory change was needed this time around. suggested not.

“It’s a completely different system. [what] I think we need a better understanding of what went wrong with certain institutions like SVB. I think we should ask the director what happened, but I don’t think we’ll see any regulatory changes. ,” he added.

Summarize this content to 100 words Tim AdamsAnjali Sundaram | CNBCAccording to Tim Adams, CEO of the Institute of International Finance, the banking sector turmoil that led to multiple lender failures is not a systemic crisis and is now subsiding.of The collapse of Silicon Valley Bank Early March, the biggest bank failure since the global financial crisis, sparked a wave of market panic that swept through the European and US sectors.Related investment newsThe escape of shareholders and depositors credit suissewith the Swiss authorities 167-year-old Facility Emergency Rescue Intermediation by domestic rivals UBSMore.the smaller one Signing bank closed by regulator Meanwhile, Wall Street giants intervened $30 billion in First Republic depositslocal lenders buy time to establish a survival plan.Since then, many have concluded that the market has stabilized and that the problem is specific to the affected bank and does not pose a systemic risk. However, spillover effects are weakening the economic outlook in many advanced economies.Speaking to CNBC on the sidelines of the International Monetary Fund (IMF) Spring Meetings in Washington, D.C. on Tuesday, Adams said the March turmoil was “a period of market turmoil or turbulence,” but that dismissed the idea that was a ‘crisis’.“There are over 4,000 banks in the US, about 10,000 banks that are part of SWIFT worldwide, and 35,000 financial institutions worldwide. was. [it’s] It’s really just a few isolated and idiosyncratic institutions,” Adams told CNBC’s Jumanna Versace.“So I think this was a market turmoil, not a crisis.The IIF is the global trading body for the financial services industry, with approximately 400 members in over 60 countries. Adams said the main concern among members was downside risks to growth, especially in advanced economies.The IMF on Tuesday cut its five-year global economic growth forecast to about 3%, marking the lowest medium-term forecast since 1990 in the IMF’s World Economic Outlook report.Pierre Olivier Gourintjas, chief economist at the DC-based financial institution, told CNBC on Tuesday that turmoil in the banking sector has weakened growth prospects. Vulnerability.“There are risks. We can talk about geopolitical risks, but the downside risks are real and the depth is unknown,” Adams said.”The Fed will probably tighten again. Other central banks in Europe and the UK are also tightening, so there are downside risks.”US and European regulators have taken swift action to quell contagion risks in the face of last month’s various bank collapses. But U.S. Treasury Secretary Janet Yellen argued Tuesday that the banking system is well-capitalized and has ample liquidity.Adams said many of the regulators he spoke to, including those involved in the development of Dodd Frank and the Basel III framework in the aftermath of the financial crisis, did not believe that significant regulatory change was needed this time around. suggested not.”It’s a completely different system. [what] I think we need a better understanding of what went wrong with certain institutions like SVB. I think we should ask the director what happened, but I don’t think we’ll see any regulatory changes. ,” he added.
https://www.cnbc.com/2023/04/12/banking-turmoil-was-not-a-crisis-but-the-downside-risks-are-real-iif-boss-warns.html Bank turmoil was not a crisis, but ‘downside risks are real’, warns IIF boss