HomeFinancial MarketsBanking Sector Stress Could Lead To Tighter Lending; ECB, Fed Officials Claim

Banking Sector Stress Could Lead To Tighter Lending; ECB, Fed Officials Claim

Uncertainty across the banking sector is being closely monitored due to the potential for a credit crunch, a Federal Reserve official divulged on Monday. A European Central Bank official also confirmed the possibility of implementing stricter lending practices.

Following the collapse of U.S.-based Silicon Valley Bank and Signature Bank, investors have been expressing anxiety over the stability of the U.S. banking sector. The issue has since spread to other parts of the globe, with UBS acquiring Swiss-based Credit Suisse in a government-backed takeover as a last-ditch effort to save the 167-year-old banking institution.

In order to subdue investors’ fears, the U.S. Treasury delivered an address on Friday stating that the Financial Stability Oversight Council agrees that the U.S. banking system is “sound and resilient.”

“What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch. That credit crunch … would then slow down the economy. This is something we are monitoring very, very closely,” Minneapolis Fed President Neel Kashkari commented on Sunday.

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