Will more banks close in the United States?
“We don’t yet know if the fallout from easy money and regulatory changes will ripple throughout the US regional banking sector with more interventions and closures ahead,” he said.
The BlackRock chief considered that the response from regulators has so far been swift and that their determined actions have helped curb contagion risks, but warned that “markets remain nervous.”
Fink was of the opinion that the current situation is the result of the low rate policies that have been seen for years and which, he pointed out, have led to a sharp rise in inflation and have forced the Federal Reserve (Fed) to rapidly raise the price of money.
“This is a price we are already paying for years of easy money and it was the first domino to fall,” he said.
“Will the misalignments of assets and liabilities be the second domino to fall?” asked Fink, who recalled that previous cycles of monetary tightening have already led to the collapse of financial institutions, either with rapid collapses or with slower crises than they went on for years.
The BlackRock founder did not rule out the possibility of liquidity problems, given that all these years of low interest rates have led some managers to increase their commitments to liquid investments, trading less liquidity for higher returns.”
In addition, he considered it inevitable that some banks would now be forced to reduce credit to stabilize their accounts and indicated that stricter capital standards for banks were likely to be established.
As for monetary policy, Fink predicted that the Fed will continue to focus on inflation and continue to raise rates.
“Although the financial system is clearly stronger than it was in 2008, the monetary and fiscal tools available to lawmakers and regulators to manage the current crisis are limited, especially with a divided US government,” he warned.