The banking industry is still reeling from the collapse of Silicon Valley Bank, and according to the CEO of hedge fund Man Group, Luke Ellis, the crisis is far from over. In fact, Ellis predicts that a significant number of banks will fail within the next two years.
At a recent Bloomberg conference in London, Ellis was asked whether he believed the sector had stabilized. His answer was a resounding “no.” He went on to say that he expects “significantly more banks that don’t exist in 12-24 months.” He singled out smaller and regional banks in the United States and challenger banks in Britain as being particularly vulnerable.
One of the factors contributing to the current banking turmoil is the rapid spread of information on social media. Ellis noted that concerns about banks can circulate at a much faster speed, whether it’s good news or bad. This has made it difficult for banks to control their own narratives and contain potential crises.
The recent market chaos prompted the emergency rescue of Credit Suisse by Swiss rival UBS, which brought some calm to the markets. However, this may be just the tip of the iceberg. Hedge funds have been betting against banks and profiting from the sector’s volatility.
Ellis’s warning is not to be taken lightly, as he is not alone in his pessimistic outlook. Alexander Chartres, investment director at asset manager Ruffer LLP, expects a recession in the United States and advises investing across different asset classes.
Despite this bleak outlook, the spokesperson for the Bank of England assures that the UK banking system is well capitalized and funded and remains safe and sound. Central banks around the world have also responded with coordinated measures to ensure the flow of cash between banks.
The future of the banking industry looks uncertain. The speed at which information spreads and the potential for crises to snowball make it difficult to predict what’s next. However, one thing is clear: investors and customers alike should prepare themselves for the possibility of more bank failures in the near future.
