Deja vu, is the crisis happening? P2

Don't be fooled. This isn't 2008. And it might not be 2007. That's good news.

But the bad news is – that doesn't mean there won't be a crisis. And this won't be what you expect.

There are, of course, similarities to 2008: moves could be reversed significantly due to a sharp rise in interest rates, the feeling that supportive policies ended after a long time without any disciplinary framework. 

which financial; the reassuring views of regulators and politicians such as Ben Bernanke, Hank Paulson and Tim Geithner… are eerily presented and repeated.

But there are too many differences to compare with the last great financial crisis. First and foremost, the banking system is actually in much better shape than it was 15 years ago, more resilient to shocks thanks to higher levels of capital and liquidity.

As a result, it's a lot harder to see real systemic risk, and it's a lot easier to blame a few individuals for bad governance. No bad asset class is on the books of the financial system the way subprime mortgage debt was listed in the 2000s. 

It is true that all three banks that announced failures this month indicate exposure to the crypto sector, in one form or another, but that couldn't affect the top US banks, which have largely shunned this risky asset class . So the crypto sector is certainly not the main explanation for what has happened at Credit Suisse over the past few days.

Much has been made of Silicon Valley Bank's (SVB) losses on its bond portfolio, but these losses are due to a lack of intelligence in the way its system operates. management, rather than the basic credit quality at the bank. There is no resemblance here with the AAA ratings (HM:AAA) – we have seen in the case of Lehman Brothers.

The high concentration of corporate deposits at institutions suggests that failure – in particular Silicon Valley Bank and Silvergate – is not a big enough problem to be systemic. Yes, business deposits are less affected than personal deposits. 

Yes, there is a whole group of banks in the United States that are disproportionately built on such deposits. But the Fed and other central banks are still very sensitive to liquidity crisis risks and have reacted much faster to avert such risks than they did 15 years ago.

Central banks hedge against liquidity risk is another important difference from 2007/2008. Both the Fed's response, in setting up the Bank Term Funding Program, and the Swiss National Bank, in providing a $54 billion line of credit to Credit Suisse Corporation (SIX:CSGN) , 

acted quickly to contain the spread, just as the Bank of England did in October in response to the short-term crisis in the UK pension market. That assertiveness is especially commendable, and especially risky, given the ongoing inflationary risk in advanced economies.

Yet another difference was evident in Thursday's decision by several tier-one banks to invest back in First Republic Bank (NYSE:FRC) with enough funds to cover the deposits the bank had made. died in a recent panic attack. This shows that the opportunity for private sector solutions to any problems still exists.

However, there is no reason to stop the spiral of panic that could end if it does happen. And some details from last week are ominous enough to raise concerns that this could be the start of something much more serious.

First, there is evidence that the system is loose, so the risks that should have been discovered are still outside the regulatory scope. SVB has lobbied hard for an exemption from regular stress testing, achieving its goal in 2018.

And just as U.S. opposition to Basel II regulations ensured that U.S. banks were undercapitalized in 2008, failure to implement Basel III regulations on capital and liquidity put banks region of the United States into its current state.

Not Basel III will be enough to save European banks if confidence in American banks begins to shake. The confidence effect is far more important than accounting ratios, and it is doubtful that the seemingly solid numbers are masking the fundamental weakness of many loans.

As Winston Churchill said, those who don't learn a lesson from history will inevitably let what happens in history repeat itself - but see what history you want to learn. There's too much uncertainty right now to approach today's markets with the confidence that they will behave as they did 15 years ago.

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