(Reuters) – The banking crisis linked to the collapse of SVB Financial Group could spread to the economy and lead to a recession this year in the United States, analysts at two major Wall Street banks say.
According to JP Morgan, the authorities’ tighter supervision of small banks and the rush of customers at the counter are expected to weigh on credit growth and without help from the big banks, the gross domestic product (GDP) in the United States could decline by 0.5% to 1.0% over the next two years.
“Continued pressure could prompt smaller banks to become more conservative in lending to preserve liquidity, in case they face depositor withdrawals, and tighter credit standards could weigh on aggregate demand,” write for their part the economists of Goldman Sachs, led by Jan Hatzius.
Trapped by the accelerated rise in the cost of credit in the United States, SVB Financial Group, which operates under the name of Silicon Valley Bank (SVB) was closed last Friday, then followed two days later the closure of Signature Bank, a another New York-based regional bank, causing panic in financial markets and causing bank customers to worry about their assets.
As investors began to digest the news, a statement on Wednesday from Credit Suisse’s largest shareholder that it is unable to provide further financial assistance to the Swiss bank, sparked a new fire in the markets, which the Swiss National Bank (SNB) has since been working to circumscribe.
JPMorgan points out that small banks, as defined by the US Federal Reserve (Fed), account for 30% of all banking system assets and 38% of total loans in the United States.
According to analysts, the collapse of SVB and Signature Bank shows that the Fed’s accelerated monetary tightening is having an impact on banks, especially on their bond portfolios.
Goldman Sachs raised by 10 percentage points, to 35%, the probability that the American economy will enter a recession over the next 12 months, citing in particular the tensions on the small banks.
(Report Aniruddha Ghosh in Bangalore; Claude Chendjou, edited by Blandine Hénault)
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