Bank crisis has potential to trigger financial crisis By Reuters

By Renju Jose

SYDNEY (Reuters) – Australia and New Zealand Banking Group’s chief executive said on Monday the latest turmoil in the global banking system has the potential to trigger a financial crisis, although it was too early to predict it could bring a crisis similar to that of 2008.

Authorities around the world are on high alert for the fallout from the recent banking turmoil following the collapse of Silicon Valley Bank (SVB) and Signature bank (NASDAQ:) in the US and the emergency takeover of Credit Suisse.

“It̵[ads1]7;s obviously a crisis for some, but is it a financial crisis, who knows? Does it have the potential to be one? Yes, it has the potential to be one,” CEO Shayne Elliott said in an interview on the bank’s website. .

But he said it was too early to assume the current state could result in “another GFC”, referring to the global financial crisis around 15 years ago that plunged the world’s major advanced economies into the worst recession since the Great Depression on The 1930s.

Australian banks did not suffer as much as those in the US and UK during the 2008 crisis, thanks in part to tighter lending standards and a more robust domestic economy.

“This is a different matter. This really has to do with the global war on inflation and how central banks are raising interest rates very quickly to fight it, and that has casualties,” Elliott, the chief executive at the nation’s No. 4 lender, said.

Australia’s banking regulator, soon after the collapse of start-up-focused lender SVB, flagged that it had stepped up supervision of local banks.

Global regulators have acted much more quickly to support banks this time, having learned lessons from previous crises, Elliott said.

“That said, it’s obviously not over. 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 go back to normal.'” These things tend to roll through over a long period of time.”

Rachel Slade, group head of personal banking at the country’s second-biggest lender, National Australia Bank (OTC:) Ltd, told the Australian Financial Review on Monday that mortgage customers had started to show the first signs of strain after 10 straight rate hikes, but there were no peaks yet in default values.

Treasurer Jim Chalmers has said Australia was in a good position to weather some of the volatility because banks were well capitalised, while the Reserve Bank of Australia last week flagged banks were “undoubtedly strong”.