April 26, 2023: On Monday, Standard Chartered’s chief executive warned that the banking sector might face fresh issues, even as the immediate risks from the previous month’s market turmoil have subsided.
Bill Winters said different issues could “come home roosting in some form of a crisis” as imbalances in some banks are shown.
“I think we should put the crisis behind us. I don’t believe we can put the issue behind us,” Winters said.
Swift, started by regulators the previous month, stopped the collapse of Silicon Valley Bank and Credit Suisse from escalating into a broader banking crisis.
But Winters showed that the “dramatic change in the macro-economic environment”, rapid interest rate hikes focusing on taming soaring inflation, had highlighted existing issues at a few lenders, which could yet play out.
“That exposed a few underlying flaws in business models or exacerbated flaws that we are aware of but maybe didn’t appreciate how serious they were,” he said.
“Those flaws are still there,” Winters added.
“Different imbalances built up during this long period of very low-interest rates that are not roosting in a few forms of a crisis. It’s incumbent on us to know where those are to try and anticipate future changes,” he said.
Winters commended U.S. and Swiss central bankers’ “highly impactful” work stemming broader contagion.
However, he noted that the episode highlighted some regulatory shortcomings that must be addressed carefully.
“There were some regulatory gaps that were famous through this, and I have not been doubtful that we’ll stop the specific gaps that have been identified,” he stated.
“I think there’s a risk that we’ll act and try to close the same gap as if everybody had the same gap, to start with, and that’s not the case,” he said.
“I think we could make it difficult for the economy with tremendous extra regulation if we’re unaware.”
Standard Chartered, making much of its profit in Asia and starting economies, is set to report revenue on Wednesday. Last quarter, the bank stated a 28% rise in annual pretax profit as international interest rate hikes improved its lending revenue.
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