Goldman Sachs and JPMorgan say SVB downfall could result in slump
The pressure on small- and mid-sized US banks after the swift downfall of SVB Financial Group could further slow the economy, and is likely to raise the probability of a recession in 2023, analysts at Wall Street said.
“Ongoing pressure could cause smaller banks to become more conservative about lending in order to preserve liquidity in case they need to meet depositor withdrawals, and a tightening in lending standards could weigh on aggregate demand,” said economists at Goldman Sachs led by Jan Hatzius. JPMorgan notes that small banks, per the US Federal Reserve’s definition, account for 30% of aggregate banking system assets, and 38% of the system’s loan book in the US.
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