The past two weeks reminded us that periods of calm in the banking sector have a habit of ending rather abruptly and there is still much to be resolved.
, Satyajit Das, a former Australian banker, corporate treasurer, consultant and author of several works on financial crises, asks some excellent questions about efforts byto reassure markets and the public that the banking system is fine.
“For the moment, whether the third banking crisis in two decades remains contained is a matter of faith and belief. Financial markets will test policymakers’ resolve in the coming days and weeks.”Hedge funds went after Deutsche Bank on Friday night, with the cost of insuring against default rising as quickly as its share price dropped; the stock was down 15 per cent at one point, forcing German Chancellor Olaf Scholz to publicly back the lender and reinforce how profitable it was.
Although there have been suggestions that bans on short selling should be instituted, investors shouldn’t rely on this and position accordingly. The last few weeks have taught us that periods of calm in the banking sector have a habit of ending rather abruptly and there is still much to be resolved, particularly in the US regional banking sector, which holds about two-thirds of the commercial real estate debt in that country at the same time that asset values are falling sharply.
That will wash through sectors in different ways, and investors need to think about how their portfolio will be affected.
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