Banking Crisis Sparks Credit Crunch in US, Warns Morgan Stanley Strategist

(MENAFN) The recent banking crisis sparked by the collapse of Silicon Valley Bank (SVB) has reportedly led to a credit crunch in the United States, according to Mike Wilson, the top stock strategist at Morgan Stanley. Wilson pointed to data that indicated a tightening of lending standards by financial institutions, suggesting that the crisis could have significant implications for the wider economy.

The warning from Wilson comes more than a month after the collapse of SVB and Signature Bank, both of which failed due to massive deposit runs. In response, top Wall Street banks stepped in to rescue First Republic, a third lender, with a USD30 billion deposit. This move was prompted by investor fears that First Republic would be the next institution to fail.

In a note seen by Business Insider, Wilson explained that lending levels have seen the steepest decline on record over the past two weeks, a trend he attributes to United States banks' efforts to offset the pace of deposit flight since the collapse of SVB.

“The data suggest a credit crunch has started," Wilson said in his note, highlighting that USD1 trillion in deposits has been withdrawn from US lenders since the Federal Reserve began its series of rate hikes almost a year ago.

The implications of the credit crunch could be significant, as it could impact businesses' ability to access credit and finance, potentially leading to a slowdown in economic growth. As such, it is important for financial institutions and regulators to address the issue and find ways to stabilize the banking system before the situation worsens.

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