To understand the 2023 banking crisis, look back to the 2008 financial meltdown

The solutions put in place to stabilise the financial system in the wake of the global meltdown have not protected us from the risks of damaged fiscal finances and weak growth potential

With financial confidence still fragile, the ability to cope with shocks like SVB and Credit Suisse is limited

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The Wall Street entrance to the New York Stock Exchange is seen in New York City on November 15, 2022. With its aggressive interest rate hikes, the Fed has opened a Pandora’s box of contagion risks with viral uncertainty spilling over into several banks, reminiscent of the mood of 2008. Photo: Reuters

David Brown

David Brown is the chief executive of New View Economics.

Published: 9:30pm, 27 Mar 2023

New crisis? What new crisis? It’s too easy to write off the current banking crisis as just another unfortunate event in a long series of setbacks suffered by the world since the 2008 global financial crash. In truth, we still haven’t emerged from the aftershock of 2008.

The world has subsequently been battered by the pandemic, the Ukraine war, the inflation shock and the current banking crisis, but they are all genetically linked by the failure of policymakers to deal with contingent risks arising from 2008. World financial stability remains deeply challenged by weak global growth potential, compromised monetary policy and badly damaged fiscal finances, a leftover from 15 years ago.

Bank balance sheets are still undergoing repair, financial confidence remains fragile and the ability to cope with new shocks like the Silicon Valley Bank (SVB) collapse and Credit Suisse troubles remains severely limited. Global policymakers are running out of time and obvious solutions, but they need to be quick before the contagion gets out of control.