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FT INSIGHT: The financial turmoil is not over - by ASR’s Ian Harnett

Beth McCann

4th APR. 2023

Ian considers implications of recent bank failures: “if 2022 was about the repricing of capital, 2023 is … about the reduction in the quantity of capital, as "quantitative destruction" puts alternative assets and non-bank financial institutions to the test" . . .

Ian continues: “At the start of every systemic crisis, financial failures tend to be labelled as idiosyncratic. As the pace and scale of financial failure spreads, that narrative becomes harder to maintain. A decade of zero rates and easy liquidity have provided the preconditions for systemic crisis, with rapid asset growth and financial innovation encouraging new entrants into lightly regulated areas. We believe that "quantitative destruction", fuelled by a toxic mix of rising rates, debt deleveraging and elevated equity valuations, has the potential to turn those financial risks from idiosyncratic to systemic.”

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