“It’s too early for the global banking industry to make things clear”

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After the collapse of Silicon Valley Bank and the forced merger of Credit Suisse with UBS, business sage Veronika Grimm (51) does not want to make things clear for the global banking industry. “One has to be very careful,” says Grimm, who serves as a member of the group. Advisory Council to the “Welt am Sonntag” (WamS) to assess the overall economic development.

“But you must also be careful not to increase the risk of a banking crisis by excessive panicking.” Psychology plays a very important role in this situation.

Further rate hikes will be required

The economist explained that no one can say with certainty at the moment whether individual cases will turn into a banking crisis. “But it wouldn’t be a good idea to speculate on that, except in the current situation.”

According to Grimm, the banking industry is “in a better position” today than it was during the 2008/2009 global financial crisis. But “gaps exist – for example, because you didn’t pay attention to risks that didn’t happen for a long time”. Stress tests were conducted on banks for risks from low interest rates, but not in the event of a rapid rate hike by central banks. At these and other regulatory points, supervisors may have to “sharpen”.

Grimm warned that the crisis in banks should not mean that central banks have stopped raising interest rates. “In terms of inflation, we haven’t hit the peak yet, more rate hikes will be needed,” said WamS economics. “If central banks loosen too soon over concerns about financial market stability, inflation could remain high for longer than expected and may even rise again.”

“Central banks need to take a closer look”

On the other hand, uncertainties in the banking sector also suppressed loans to the economy and indirectly inflation. “This is why central banks have to look very carefully and weigh them,” Grimm warned. “The situation is extremely difficult.”

Chancellor Olaf Scholz (64) (SPD) and Federal Finance Minister Christian Lindner (44) (FDP) assured Friday that there is no reason to worry that financial institutions in this country such as Deutsche Bank will be hit by the recent turbulence surrounding Credit Suisse. or Silicon Valley Bank can be registered.

Deutsche Bank’s share price temporarily dropped more than 13 percent on the Frankfurt Stock Exchange on Friday. The main reason was the sharp increase in the cost of credit default insurance. (AFP)

Source :Blick