SVB collapse may be start of ‘slow rolling crisis’, warns BlackRock boss

theguardian.com:

The collapse of Silicon Valley Bank could just be the start of “a “slow rolling crisis” in the US financial system with “more seizures and shutdowns coming”, the chief executive of the world’s largest asset manager has warned.

The CEO of BlackRock, Larry Fink, also predicted in a letter to investors and company bosses that inflation would persist and rates continue to rise, trends that both contributed to SVB’s collapse.

The failures over the past week of not only the California-based bank but also fellow US lenders Signature and Silvergate have prompted jitters across global markets. Such concerns were further fuelled on Wednesday when shares in Credit Suisseplunged to record lows after the troubled Swiss lender’s biggest investor ruled out providing it with more funding.

Fink described the situation as the “price of easy money” that was having to be paid after the Federal Reserve’s decision to start aggressively raising interest rates. “Something else had to give as the fastest pace of rate hikes since the 1980s exposed cracks in the financial system,” he said.

Fink added it was not yet clear where new victims of the “asset-liability mismatches” that claimed SVB would be found.

“It’s too early to know how widespread the damage is,” Fink wrote. “The regulatory response has so far been swift, and decisive actions have helped stave off contagion risks. But markets remain on edge.”

However, other leading financial figures warned that the instability brewing in the European banking sector could pose an even bigger threat to global market stability.

The high-profile economist Nouriel Roubini told Bloomberg news that if Credit Suisse were to collapse it could result in a “Lehman moment” – a reference to the collapse of the US