Financiers predict a new global economic crisis: the war in Ukraine played a significant role in its development

On November 7, the leaders of the world's leading banking companies gathered at the Global Financial Leaders Investment Summit, organized by the Hong Kong Monetary Authority. They expressed concern that the next financial sector crisis could arise from growing geopolitical uncertainty. It could become a test of the stability of the financial market, reports Reuters.

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The next global financial crisis will likely be driven by geopolitics, said Morgan Stanley Chairman and CEO James Gorman.

Gorman was among more than a dozen international executives speaking at the Global Financial Leaders Investment Summit, organized by the Hong Kong Monetary Authority.

“The problems with democracy in some parts of the world are very clear,” Gorman said.

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The comments come as the conflict between Israel and the Gaza Strip unfolds. That adds uncertainty to the global economic outlook, plus the Russian-Ukrainian war drags on and Sino-American tensions simmer despite efforts to bring the leaders of the two superpowers closer together.

Deutsche Bank (DBKGn.DE) CEO Christian Sewing said markets were largely resilient to global events, but that could change.

“My biggest fear is that there will be another geopolitical escalation - and this could happen quite quickly - and the markets will actually lose their calm at some point,” Sewing said.

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Politicians on both sides of the Atlantic rallied in March to prevent a possible repeat of the 2008-2009 global banking crisis. Nervous investors withdrew record amounts of money from several regional U.S. lenders, including Silicon Valley Bank.

In March 2023, Silicon Valley Bank, a bank focused on working with startups, collapsed in the United States. Its collapse was the second largest in US history and triggered a string of smaller bank failures. Switzerland's oldest bank, Credit Suisse, is also on the verge of bankruptcy.

The rescue operation carried out by the Swiss government and the country's national bank made it possible to avoid its liquidation, but it ended up being absorbed by a larger competitor, UBS.

Tighter regulation

In the US, the banking regulator announced sweeping proposals to introduce stricter capital rules for large lenders following a run on deposits from smaller banks earlier this year. In turn, industry representatives argue that there is no justification for a significant increase in capital.

“Certainly I think the efforts of some regulators at this time to raise the issue of capital are misguided. They should focus on other issues,” said UBS Group Chairman Colm Kelleher.

“The goal of the policy is to limit the size of big banks,” Gorman said.

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“But when you put pressure on the system, the least competitive players retreat,” he said, adding that it is difficult to predict the next crisis until the political dilemma is resolved.

Also, the heads of the world's largest banks opposed the introduction of stricter banking rules, reports UNIAN.

“While we want the system to be safe and sound, when I looked at these rules, I think they go too far,” Goldman Sachs CEO David Solomon said, referring to tighter banking regulation.

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