Fifteen years ago, in March 2008, a storied name in US banking failed. The government-backed sale of Bear Sterns to rival JP Morgan was seen at the time as putting a floor under the growing credit crunch and markets rallied.
As we now know, the orderly unwinding of Bear Sterns would be followed six months later by the chaotic collapse of Lehman Brothers and a scary new phase of the global financial crisis.
The scars of this crisis largely informed how bank executives, investors and regulators have thought about things in subsequent years, right up to the recent wobbles. With that comes a tendency to fight the last war, comparing the current crisis with the past one.
The good news is that current stress in the banking system is nothing at all like in 2008. But that doesn’t mean the current episode can’t end up causing damage.
So we need to ask ourselves four key questions, acknowledging that the situation is uncertain and fluid:
To what extent are we dealing with a few bad apples versus a systemic problem? What is the likely spillover to the broader financial system and economy? What does it mean for policy? And how can it affect the South African financial sector specifically?
Reckless safety