Banks were supposed to be boring after 2008. But recent collapses have exposed that vision as a fantasy, writes former analyst Rupak Ghose in a guest view
Supervisors themselves are another source of uncertainty. Lenders are uniquely important to the rest of the economy, and also politically toxic, which makes unpredictable policy moves a regular occurrence. Europe’s top bank watchdog Andrea Enriadividends and share buybacks during the pandemic, even though lenders’ capital levels had not declined to the levels at which such measures would normally kick in. More recently, U.S.
Finally, as the Californian group’s rapid collapse illustrates, banks live and die on trust. Bosses can point as much as they like to strong capital and liquidity ratios, which investors follow religiously. But, particularly in an age of social-media panics and instant money transfers, confidence and customer cash can disappear overnight. Silicon Valley Bank’s clients tried to withdraw $42 billion in a single day.
The upshot for bank investors is that seemingly low valuations might not be low enough. Just ask the Saudi National Bank
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