Page 16 - ISO April 2023

INVESTMENT STRATEGY QUARTERLY

Everything Everywhere All At Once; Banking

Turmoil and its Aftereffects

Jeremy Batstone-Carr, European Strategist, Raymond James Investment Services Ltd*

It was April, not March, that the poet and playwright TS Silvergate and Signature banks has, as Senatorial testimony
Eliot once described as “the cruellest month”, yet the confirms, little to do with regulation and its process. The reasons
why capital adequacy fell below those statutory minimums set
latest verse in this strangest of years has proved the most
out in Basle IV rules remain the subject of conjecture, but
volatile for investors in financial markets. Without regulators moved fast to close these businesses down before Tier
question, the month of March has been dominated by 1 capital (retained earnings and shareholder equity) could turn
concerns regarding the health of the banking sector and negative. True, some depositor flight did take place, funds finding
their way into the money markets, other larger banks and the
possible contagion elsewhere. Whilst those with
bond markets, but it could have been much worse. For all the
responsibility for market oversight have acted in both a furore surrounding depositor insurance (a debate which has
swift and timely fashion to ringfence mid-month turmoil, surfaced tangentially in the UK and Europe too), the failed US
restoring order to what threatened at one time to regionals have sufficient assets to pay out all remaining
descend into disorderly chaos, the ramifications both for depositors without recourse to taxpayer funding. To be clear, a
crisis is an adverse circumstance in which there are no good policy
the global economy and financial assets will likely take a
options, only choices between bad and less bad. Although
while to play out and form a critical feature on investing financial markets have been rocked by unfolding events, having
landscape for some considerable time. prepared the ground for possible future problems in the
immediate aftermath of the Great Financial Crisis of 2008/09 good
A discussion regarding the March tumult visited on both sovereign policy options do now exist, and they have been deployed with
bonds and stock markets should start with applause for alacrity. Closing down and liquidating those banks immediately
regulatory oversight. The failure of the US regional Silicon Valley, when Tier 1 capital drops below 6% of risk-weighted assets (raised

*An affiliate of Raymond James & Associates, Inc., and Raymond James Financial Services, Inc.

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