US banking crisis ‘forgotten too quickly’
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The banking crisis in March “has been forgotten a bit too quickly”, according to one investment manager, warning that regulation of US banks could be tightened if the issue reappears.
Altaf Kassam, EMEA head of investment strategy and research at State Street Global Advisors, said while a number of banks failed, the crisis appears to have been forgotten too quickly: “Very quickly after that, the market started moving quite strongly upwards, the equity market at least.”
The banks that made headlines in March were mainly regional, including Silvergate, Silicon Valley Bank, Signature Bank and First Republic. The crisis prompted close scrutiny by US authorities and central banks around the world.
In Europe, Swiss bank Credit Suisse was taken over by UBS in March for $3.25bn after a large outflow of client money.
“I think there are still issues with the banking crisis in the US throughout,” Kassam said a media roundtable organised by State Street on 19 July in London.
He warned the problem “may be bubbling a bit under the surface” and could lead to tighter regulation of US banks.
Kassam said: “One of the repercussions has been the tightening of credit standards, which I do believe has still got to be fully reflected in high yield spreads, for example. So I think if there is a repercussion, that would be it.”
The liquidity coverage ratios of US banks on the whole are lower than those of European banks, he added: “I think those kind of measures are going to get tighter for US banks.”
US insurers have, overall, weathered the banking crisis well due to strong capitalisation but are keeping the situation under close watch. For instance, Protective Life set up a cross-functional team in March with three meetings a week initially, moving to weekly meetings once the issue subsided.
Aileen Mathieson, group chief investment officer of Aspen, said the Bermudian insurer worked with all its asset managers to understand if any underlying investments were exposed to these banks and if so, how that position was to be managed.
Do you think the US banking crisis could resurface?
