US Banking System Can Weather SVB Contagion Risk, El-Erian Says
(Bloomberg) -- US banks can contain contagion risk and system stress stemming from the turmoil unleashed by Silicon Valley Bank, Mohamed El-Erian said.
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“Contagion risk and the systemic threat can be easily contained by careful balance sheet management and avoiding more policy mistakes,” El-Erian, the chairman of Gramercy Funds and a Bloomberg Opinion columnist, said in a tweet on Friday.
At the same time, while the US banking system “is solid as a whole, and it is, that does not mean that every bank is,” he said.
“Due to the volatility in yields after the prior protracted period of leverage-enabling policy, the most vulnerable (banks) currently are those vulnerable to both interest rate and credit risk,” he said.
His comments followed this week’s surprise announcement from Santa Clara, California-based SVB that it was issuing $2.25 billion of shares to bolster its capital position after a significant loss on its investment portfolio.
El-Erian has been vocal in his criticism of Federal Reserve Chair Jerome Powell, saying his comments after FOMC meetings have fueled considerable volatility in markets that could risk both economic well-being and financial stability.
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