SVB failure didn't result in crisis for banking sector as whole, says Morgan Stanley CEO James Gorman
1 min read . Updated: 24 Apr 2023, 11:00 AM IST
Premium- Gorman believes that this issue is not overly complex, and that most banks have managed their risks effectively.
James Gorman, Chairman and CEO of Morgan Stanley, stated that while the failure of Silicon Valley Bank and Credit Suisse came as a surprise to the financial industry, it did not result in a crisis for the banking sector as a whole.
According to a report by Nikkei Asia, in Gorman's opinion, there isn't a crisis in the banking industry as a whole. “I think we're not in a banking crisis. We have some individual banks that [are in] crisis and I believe the reason they're in crisis is because they've mismanaged their duration and interest rate risk."
However, Gorman believes that this issue is not overly complex, and that most banks have managed their risks effectively. Therefore, he believes that the banking system will remain stable and healthy.
“This is not remotely similar to what happened in 2008. This is not a systemic crisis. There were a few institutions that frankly have not managed themselves properly in this period of time. This is definitely not the beginning of a financial crisis." Gorman noted.
When asked about his thoughts on increased banking regulations to shore up banks, Gorman responded that the largest banks, including his own institution which is one of the eight globally systemic banks, are already subject to rigorous regulations. “I think they're very highly regulated, and I'll leave it up to the government to decide whether they want to increase regulations for smaller banks."
Furthermore, Gorman believed that while it is possible for the U.S. to enter a recession, he does not think it is likely. “It's possible. I don't think it's a probable. It's less than a 50% chance. It's just we've still got positive growth, we've got very low unemployment, we've got wage increases, the bank balance sheets are strong, and consumer balance sheets are strong."
Meanwhile, US annual consumer inflation eased in line with expectations to 6.0% in February but remains elevated, according to government data released on March 14.
According to media inputs, the consumer price index rose six per cent from a year ago, below January's figure and in line with expectations, according to Labor Department data, the smallest such increase since September 2021.
(With inputs from agencies)