‘Any smell of risk is quite dangerous’: ANZ boss
ANZ boss Shayne Elliott says this week’s bank-driven tremors on global markets have sparked questions of whether more problems are looming in the financial sector, as Swiss giant Credit Suisse’s woes revived investor fears.
After a tumultuous week for global banking, sparked by the collapse of Silicon Valley Bank, the second-largest bank collapse in US history, the focus of investors crossed the Atlantic on Thursday.
ANZ CEO Shayne Elliott: “In a market like this, people are nervous.”Credit:Arsineh Houspian.
In an attempt to shore up plunging market confidence, Credit Suisse has struck a deal to borrow up to 50 billion francs ($81 billion) from the Swiss National Bank, which has stepped in to stabilise the troubled lender.
Earlier, Credit Suisse’s shares crashed as much as 31 per cent after its largest shareholder Saudi National Bank said it would not chip in any more capital, triggering a sharp sell-off in bank shares in Europe and the United States. Australia’s sharemarket was also caught up in the slump, losing 1.5 per cent, with shares in most major banks leading the market lower.
Elliott, who runs the nation’s fourth-biggest mortgage lender, said he remained “very optimistic” about Australia, and said the recent turmoil had not affected bank funding markets. He also highlighted fundamental differences between the structure and regulation of Australian banks, compared with the troubled US regional banks.
‘Silicon Valley Bank in and of itself, you wouldn’t describe as the big one, but … everybody’s sitting there going, is this an early warning sign? Is there more to come?’
Elliott said the market did not yet have the full picture of what was happening at Credit Suisse, but the reaction reflected how jittery investors were as central banks jack up interest rates to stamp out inflation.
“In a market like this, people are nervous, right? You know, shareholders, depositors, customers, people are nervous and so any smell of risk is quite dangerous,” Elliott said in an interview. “And I think that’s what you’re seeing playing out with Credit Suisse at the moment.”
Elliott said he did not think the recent market turmoil sparked by the collapse of SVB was akin to the collapse of Lehman Brothers in 2008, saying Silicon Valley Bank was a “moderately large US bank”. But he said the financial community, including bankers, investors, analysts, regulators and governments, were asking themselves if the tremors were a sign of more to come.
“Silicon Valley Bank in and of itself, you wouldn’t describe as the big one, but it’s an early tremor and the question is, everybody’s sitting there going, is this an early warning sign? Is there more to come?”
This week’s dramas in US and European banking have weighed down the share prices of Australia’s biggest banks, though analysts have emphasised that SVB’s problems were company-specific. Australian lenders are also subject to much tighter regulation and supervision.
Morgan Stanley analyst Richard Wiles said in a note to clients the direct risk to Australian banks from the collapse of SVB was “modest”, highlighting regulatory changes that have made the lenders more shock-proof over the last 15 years.
Wiles highlighted a metric known as the liquidity coverage ratio, which requires banks to hold enough liquid assets to cover a 30-day run on deposits. He said calculations for the ratio assumed about $500 billion of deposit outflows.
“We believe that APRA and the major Australian banks learned the lessons of the 2008 global financial crisis and have significantly strengthened their liquidity, funding and capital,” Wiles said.
Even so, Wiles said recent events in the US banking sector could drive up the cost of wholesale funding for Australian banks, which could intensify the competition for local lenders to attract stable deposits.
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