Banking sector turmoil – The next crisis?

US Economics Update

Bank stress continues with First Republic collapse

The collapse of First Republic Bank is no big surprise – it had been teetering on the edge since suffering $100bn in deposit withdrawals mostly in March – but it’s a timely reminder that banking...

US Commercial Property Focus

Where are the risks from US commercial real estate greatest?

While we expect a more-than 20% peak-to-trough price correction for US commercial real estate, offices face a much tougher outlook, with large falls in net operating incomes compounding the broader re...

Global Markets Focus

Just how big a problem are bonds for banks and the economy?

US banks’ problems may have only just begun, but we doubt a Global Financial Crisis 2.0 is on the cards.

Capital Daily

European G-SIBs need a better RoE to justify a higher valuation

While the shares of Global Systemically Important Banks (G-SIBs) in Europe bounced today on the news that a buyer has been found for parts of the failed US lender, Silicon Valley Bank, their price...

Asset Allocation Update

Bank shares aren’t bound to underperform in a credit crunch

Needless to say, economic downturns are usually bad news for US banks’ share prices. But banks haven’t always underperformed the overall stock market in a recession – even when there has been a...

Capital Daily

Taking stock of the Swiss shotgun wedding

Financial markets have greeted the second consecutive weekend bank rescue/resolution – this time in Switzerland – with cautious optimism. But there is still an enormous amount of uncertainty about...

Global Economics Update

What next after Credit Suisse?

While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of...

Global Markets Focus

Just how big a problem are bonds for banks and the economy?

US banks’ problems may have only just begun, but we doubt a Global Financial Crisis 2.0 is on the cards.

Global Markets Update

Taking stock of market moves amid the turmoil

While the backdrop has shifted dramatically, we still think there’s a strong case for our existing forecasts of a further rally in long-dated bonds by the end of the year, and some near-term strength...

Global Markets Update

Banking stress raises another dilemma for central banks

We are resending this Stress Monitor to include clients of our Global Economics Service. The ghosts of 2008 have made a sudden reappearance. Many metrics of core market functioning have worsened...

Global Economics Update

How could the situation escalate?

We are resending this publication to include clients of our Property Services. We have already outlined some different scenarios of how things might evolve from here and it is still possible that the...

Capital Daily

ECB decision is a test of the conundrum facing central banks

The renewed sell-off in global bank equities today, centring on Credit Suisse, is evidence that concerns about the resilience of the banking sector are now spreading outside of the US. There are still...

Capital Daily

Monetary policy and markets in the wake of SVB

How the fallout from events so far affects the path of the federal funds rate, and how that interacts with inflation and economic growth, will be crucial, in our view, to how markets evolve over the...

Global Economics Update

Three scenarios for how the SVB fallout will evolve

Given the large amount of uncertainty about how the fallout from SVB’s collapse will evolve, we have grouped possible outcomes into three broadbrush scenarios. Only in the worst scenario of financial...

Capital Daily

Market to Fed: must try harder

Financial markets have a had a rough few days as the rapid collapse of three regional US banks has reawakened the ghosts of 2008. There are three key points to make.

Global Economics Update

Key questions and answers about SVB

This Global Economics Update answers 5 key questions about the fallout from SVB’s collapse. While the situation remains in flux, there are good reasons to think that it does not call into question the...

Capital Daily

Taking stock of the plunge in bond yields

US government bond yields have tumbled over the past day or so amid evidence of wage pressures easing in the February US Employment Report and concerns over banking sector risks. As thing stand, we...

Global Economics Update

From inflation crisis to financial crisis?

Problems at California-based lender Silicon Valley Bank (SVB) have refocussed attention on financial sector risks. In light of this, we are resending a report from last October that provides a...

Global Economics Focus

Risks from the ‘shadow banking’ sector

As things stand, we think it is unlikely that non-bank financial intermediaries (NBFIs) would trigger a major financial crisis comparable to the Global Financial Crisis. The biggest risks relate to...

US Economics Update

SLOOS shows banks tightening credit conditions

The recent turmoil in the banking sector doesn’t appear to have triggered a severe further tightening in credit conditions, but since lending standards were already being tightened to a degree only...

US Economics Update

Bank stress continues with First Republic collapse

The collapse of First Republic Bank is no big surprise – it had been teetering on the edge since suffering $100bn in deposit withdrawals mostly in March – but it’s a timely reminder that banking...

Capital Daily

Mixed earnings unlikely to change outlook for the banking sector

Q1 earnings reports from US banks have been a mixed bag thus far; we still believe the sector faces a difficult year ahead.

US Economics Update

Are small banks and CRE the next doom loop?

Fears over small regional banks in the US have focused on the unrealised losses on debt securities and deposit insurance but, in what would have echoes of the savings and loan crisis, maybe we should...

US Economics Weekly

Fed right to expect economic hit from bank turmoil

The Fed will need to wait at least another few weeks for clearer evidence of the impact from the recent banking sector turmoil, but we expect economic weakness will convince officials to move to the...

US Rapid Response

US Fed, Treasury & FDIC take emergency action to stem bank runs

US Economics Update

SVB collapse a reminder of financial risks

The circumstances of the Silicon Valley Bank (SVB) collapse are unique enough that it probably won’t trigger a widespread financial contagion. Nevertheless, it is a timely reminder that when the Fed...

US Economics Weekly

Financial risks could spoil Powell's hawkish plans

Despite the strength of payrolls last month, the rest of February's labour market data was more mixed - with the unemployment rate rebounding and a smaller monthly gain in average hourly earnings. The...

Europe Economics Update

Bank stress tests to leave some questions unanswered

Recent events have highlighted that meeting regulatory capital and liquidity requirements does not guarantee that banks will be financially stable. The forthcoming EU bank stress test results should...

Europe Commercial Property Update

The risks to banking from commercial property

Real estate exposures have not been central to financial developments in Europe over recent weeks, but, as property prices correct after a decade of steady expansion, some strains are likely to emerge...

Europe Economics Update

How worried should we be about the euro-zone’s banks?

We doubt that the banking sector crisis which has hit US regional banks and Credit Suisse will morph into a sustained or systemic problem for the euro-zone’s banks. However, there may well be further...

Europe Economics Weekly

Europe’s banks, the ECB and pension reform in France

There a plenty of reasons to be cautiously optimistic about Europe’s banks. While the renewed sell-off in bank equities on Friday show that it is too soon to sound the all clear, the latest comments...

Europe Rapid Response

UBS takeover of Credit Suisse (March 2023)

Nordic & Swiss Economics Weekly

Credit Suisse still under scrutiny

The huge lifeline offered to Credit Suisse by the SNB this week has resolved its immediate liquidity problems but it may not be the end of the story given the bank's underlying problems. Meanwhile, we...

Europe Rapid Response

Credit Suisse reignites banking fears

Japan Economics Update

Credit risk lurking in the shadows

Japanese banks have nearly doubled their lending to overseas non-bank financial intermediaries over the past decade. Some of this reflects purchases of collateralised loan obligations, most of which...

Japan Economics Update

Quantifying the risks from banks’ foreign claims

With bond yields now dropping back again, the drag from unrealised losses on banks’ capital ratios should start to reverse. However, a sharp increase in losses on banks’ foreign loan portfolio has yet...

UK Economics Weekly

Banking situation appears to be stabilising, but risks remain

Even if policymakers are successful at putting a firewall around the recent problems in the global banking system, some damage to the UK economy may already have been done. And while we think...

Canada Economics Update

Housing would be main casualty of SVB contagion

The Canadian banking sector is heavily concentrated, reducing the risk that deposit runs at small lenders might trigger a broader crisis of confidence for the entire sector. As things stand, the...

Australia & New Zealand Economics Update

Financial system should withstand SVB shock

Australian banks are unlikely to experience the same valuation losses that resulted in the demise of Silicon Valley Bank. The biggest risk is that a freezing up of overseas bond markets shuts down...

Precious Metals Update

Safe-haven demand to support gold, for now

Concern about banks and the US debt ceiling will keep the gold price historically high in the next few months. However, once these worries fade, we think that longer-term headwinds will come into play...

US Commercial Property Focus

Where are the risks from US commercial real estate greatest?

While we expect a more-than 20% peak-to-trough price correction for US commercial real estate, offices face a much tougher outlook, with large falls in net operating incomes compounding the broader re...

US Commercial Property Update

Regional banks’ CRE exposure to weigh on lending

US regional banks’ higher exposure to CRE debt means we expect their struggles to weigh heavily on credit availability for commercial real estate investors. Even without building in second round...

US Commercial Property Update

Where does property fit into the banking turmoil?

While real estate is not the main cause of the current financial turbulence, as it was in the late 2000s, it has played an indirect role and may be implicated in any further instability. And property...

Commodities Update

Commodities and the spillovers from financial markets

While commodity prices have also been caught up in the chaos stemming from the banking sector turmoil, so far the impact hasn’t been too alarming as price falls for most commodities haven’t been...

Commodities Update

First thoughts on banking stress and commodity prices

Commodity prices have tumbled as concern about a banking crisis has grown. The downside risks to our forecasts, which we recently attributed to higher interest rates, now include banking sector stress...

US Commercial Property Update

Initial US real estate takeaways from the bank collapses

The direct impact on real estate of the collapse of two US regional banks over the weekend is likely to be relatively small. But we expect lending criteria to become more cautious in the short-term...

UK Commercial Property Update

How much of a risk does UK CRE debt pose?

The UK commercial real estate (CRE) debt market seems to be in a better position than the US, where troubled regional banks were the main providers of finance. That said, credit conditions are also...

Emerging Markets Economics Update

EM banks: revisiting credit risks

Spillovers from the global banking crisis to EMs appear limited so far. Encouragingly, too, most EM banks appear to be well placed to weather a period of rising non-performing loans resulting from...

Emerging Europe Economics Weekly

SVB, Credit Suisse & the potential implications for EE

Economies in Emerging Europe (EE) are particularly vulnerable to a sharp weakening of capital inflows if concerns about the health of the global banking system were to escalate. Investors revised down...

Latin America Economics Weekly

Banking turmoil spillovers, Argentina’s IMF loan

Latin America's direct exposure to SVB and Credit Suisse is limited, but the turmoil is still likely to have indirect effects on the region. To the extent that growth in the US is weaker, Mexican...

Africa Economics Weekly

Ripples of global banking turmoil in Sub-Saharan Africa

Strains in the global banking system have roiled financial markets, but in Sub-Saharan Africa the main impact of the turmoil is likely to feed through via lower commodity prices and tighter external...

China Economics Weekly

China has its own banking sector vulnerabilities

China’s financial system has limited direct exposure to foreign banks. But recent global banking strains still pose some downside risk to the country’s economy. And China’s banking sector has...

Emerging Asia Economics Weekly

Can Asia continue to ride out the global storm?

The impact of the current turmoil on Emerging Asia has so far been relatively small, and most currencies have appreciated against the US dollar over the past week. Large current account surpluses mean...

India Economics Weekly

SVB and Credit Suisse fallout, April rate hike

For India, the fallout from the SVB collapse and Credit Suisse crisis has been limited. The big unknown is whether banking sector problems will flare up elsewhere. At the aggregate level, the Indian...

Middle East & North Africa Economics Weekly

How do the SVB and Credit Suisse crises affect MENA?

The turmoil in the global banking sector could put currencies in North Africa under pressure if strains intensify and capital inflows dry up, which could hasten a sovereign default in Tunisia. For the...