Get 40% Off
🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

Blackrock Chair Expresses Fear Over Follow-up Financial Crisis

Published 03/19/2023, 05:00 AM
Blackrock Chair Expresses Fear Over Follow-up Financial Crisis

  • Blackrock (NYSE:BLK) chairman, Larry Fink thinks the financial markets are still on the edge.
  • Fink questioned in the asset liability sector will be the next to fail in a follow-up crisis.
  • According to Fink, the financial sector is haunted by unsustainable policies of past years.

Larry Fink, the chairman of the asset management firm Blackrock believes that the markets are on the edge, despite the swift reaction by regulators to stave off contagion risk in the wake of recent bank failures. Fink expressed fears over a follow-up crisis in asset liability, questioning if it could be the next sector to fail.

The asset management chair shared his opinion about the current market situation via his traditional annual letter to investors. In the letter, he noted that a lot has changed in the markets in the last 15 years. According to him, since the 2008 financial crisis, markets were defined by extraordinarily aggressive fiscal and monetary policy, leading to spikes in inflation figures that have reached levels not seen since the 1980s.

In the letter, the chair noted that to curtail the spiking inflation, the Federal Reserve raised interest rates by nearly 500 points in the past year. He believes this fallout of unsustainable policies of past years has finally turned around to haunt the financial sector.

According to Fink, despite the bond markets being down by 15% last year, it was not enough as the market still found floors underneath to fall to. He noted that the recent rate hikes, which are the most frequent since the 1980s, exposed the cracks in the financial system.

Fink believes the failure of Silicon Valley Bank (SVB) is a classic asset-liability mismatch and the biggest bank failure since 2008. He thinks it is too early to know the extent of the ripple effect of the situation, considering that following SVB’s crash, two other smaller banks collapsed. He commended the regulatory response but questioned if it would be enough to prevent another crash in a related sector.

He said:

We don’t know yet whether the consequences of easy money and regulatory changes will cascade throughout the U.S. regional banking sector with more seizures and shutdowns coming.

However, Fink thinks it has become inevitable that some banks will need to pull back on lending to shore up their balance sheets. That would mean a rollout of stricter capital standards for banks.

The post Blackrock Chair Expresses Fear Over Follow-up Financial Crisis appeared first on Coin Edition.

See original on CoinEdition

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.