going into the balkans by the time we get in. so monday is very wet weather to come to some of the islands across the central mediterranean, west, a weather pushing into the north of africa to the west of this the spain and portugal. the sky is clear up across the move in areas temperature is still on the rise in the south and lots of heat coming through. hold of us, that's 35 degrees celsius on monday. the, the latest news as it breaks it, does it say that a hundreds of students, refugees within the community or you have to be registered then people cannot access page with detailed coverage. he believes his message of protecting fundamental rights and democracy. but once again bethany with voters from around the world, one thing it shows is russia's continued debility to be able to strike anywhere in this country whenever it pleases the bank

signing of this week in the united states. i'm concerned about others following the collapse of credit suisse and much. what's behind these events and the reason for the tennessee of this up to as all the risk of a broader financial crisis. this is inside story, the hello welcome to the program of adrian said it concerns about the stability of banks in the united states and elsewhere persist. first republic failed this week. another 2 banks collapsed in march. the white house is keen to reassure americans and the world that everything's under control, but the fact is that it's most bullet time since the 2008 financial crisis. the recent collapse of switch giant credit suisse means the shock waves rippling through

a globalized apple interconnected financial system. so all of these isolated unconnected events or signs of something deeper and more worrying. we'll be finding out what our guests think in just a few moments, but 1st a report from, well, i gotta be, looks at pace. the regulators in the united states seized and battled 1st republic bank early on monday and promptly sold it, hoping to end the term while that's raise fresh questions about the health of the banking system. first republic was one of the land dispatches by a crisis and confidence in much clients with large accounts, with quick to pull their money at the 1st sign of trouble. following the failure of silicon valley bank and signature bank, they and 1st republic were hooked by retakes. it looks like the federal reserve will probably continue raising interest rates and that will compound the problem. the 1st republic bank faced where it was earning less interest on its

loans than it was paying for its liabilities. the collapse of san francisco based 1st republic is the 2nd largest in us history. jp morgan chase took over the bank and the deal broke it by regulators. but it renewed political debate about financial regulation. if your bank fails, you should be record the. the regulators should be required to call back the executive compensation for the last 34 or 5 years. similarly, if your bank fails, you should be barred from ever being an officer or director at a, at a bank in the future. they all worries to about bigger banks becoming too powerful as a result of government intervention of us has backed itself into a corner where um, the way that we protect uninsured depositors. when a bank fails is to have a larger bank. gobble it up, that then makes the larger bank more likely to be too big to fail and each time

this happens, the problem is compounded in washington, president or abiding, attempted to reassure people that there's nothing to worry about. these action is going to make sure that the banking system is safe and sound, and that includes protecting small businesses across the country who need to make payroll for workers and their small business concerns about the banking sector. it's just confined to the u. s. in march, so thirty's, full credit suisse, to agree to a take over by a rival u. b. s. the demise of its 2nd largest bank severely damaged switzerland's reputation for financial stability and dented sentiment among investors further afield by the have a months it before inside story. well, let's bring it out. guess for today's discussion from los angeles for joined by william lee chief economist at the new can institute of independent economic sink

time. because a full month division chief at the international monetary fund from london, nikki price chief economic adviser at the center for economics and business research. one of the u. k is leading consultancies and in massachusetts, cornelius electra and financial law, the boston university school of law enforcement, assistant general counsel of the federal was a portable welcome to you all. and let's stop with you. then. why did 1st republic go on the, is it assign, brought up by engine crisis. we have a crisis in st supervision, not a banking crisis. what we've seen fail or badly managed banks, or specialized banks that took very strange business models that, that deviated from standard banking. standard banking generally says that you should diversify your loan portfolio. and united states is a very different country that in many countries in europe and asia, where there are over $4000.00 banks noted states, but banks only account for about 11 percent of total corporate financing. so the

corporate sector really depends upon capital markets more than they do banks. however, banks to serve as the small businesses. and what we found with the fail things is that the managements of those banks chose to specialize in either crypto currencies or venture capital with us or chasing after which people in which the posits and, and those models are very specialized and highly highly um, and diversified and so they were subject to, to runs that came about because they just straight started going out. so, so we, we have a series of bad banks and they were made by the banks united states that the supervisor failed to identify and shut down. so that could be the, is the problem, not a systemic problem in the back the system per se, vicky price you, do you agree with that? we have a series of, of bad banks. i mean, how can a bank be hurt by a federal reserve interest rates higher? i mean, i'm surely isn't an interest rate as something but banks pass on to that customers . so oh, that is absolutely true. i mean,

what tends to happen of cost is to interest rates a high, then what you owe are on the way up, what banks do is that they charge a lot more on the loans, but they don't necessarily increase deposit rates, interest rates, as fast as that so they make a big a margin. so if you are a normal retail bank, which is diversified, then you do reasonably well, but interest rates go up. you don't just so well, but interest rates are low. and the trouble is, of course, according to the bank. so we're talking about but also why the, if you look at what happened over in europe with credit risk is that you have a retail bank. you have the commercial side of it, which of course lends quite a lot to businesses which may be great to difficulty because of the higher interest rates themselves. so they have to pay on the loans. and then you've got a wealth management division, which is the one that credit suisse also had, which is quite, you know, doing reasonably well, but where money started flowing out, debates. but also you had a very strong wealth management division as well. a number in the 1st republic bank

as well, which was the one that jp morgan decided it really wanted to have those wide bid for us. now a very significantly how this varies bits of the bank too, depending on what happens with the cycle and also with interest rates. and it is absolutely true that if one isn't diversified significantly, because one specializes maybe in the tech sector, which is what was happening with a number of the banks in the us. oh, you quite slow or relatively, in relation to some of the why did market and you depend a lot on particularly the policies which may suddenly disappear. so you're not just the 1st you find new deposit based only the, then your in great to risk of changes in the environment, particularly changes in interest rates and another of those more of banks which tend to specialize. in date, i have 10 to tool. so no, no thorough specialize with the tech sector and commercial property each other. they also extend to, to invest in relatively safe assets like treasury bills in the us. in other words,

bones, government bones which have tended to be very safe. and yet when interest rates go up, of course, the value of those bones goes down very significantly. so when people withdraw that people say somebody because they've worried about you and you try to sell those assets, you have which are bones which are funding in price. then you have a serious in balance due by the bank, and you end up having to be rescued or have someone by you or basically folding, which is exactly what we've seen happen in a number of cases in the us recently. excellent, great if um, the 1st republic had been looking for a signature in the weeks leading up to it's the purchase of its assets, buy it by jp morgan. if market forces and been allowed to play out. i didn't find a buyer and it had been allowed to collapse. what would have been the repercussions as well? and i think the policy makers who were concerned mightily about the still over

effects of failure, particularly, particularly with regard to the regional banks. i agree with all that has been said previously except for the club. the comment that i could go back to that we might consider, but um, you know what we have to this current situation is unusual from past crises and past credit crises. the problem has been with assets, mainly loans and investments. here we have 2 bags, 3 bags, 4 bags. now that the sale largely due to their liability. so their deposits. and that has been compounded by technology. the policy makers really haven't caught up to the side. the customer has viewed the retail or commercial, can move their deposits with a click of a house, you know, in, in the seconds we, we do tend to think of a bank runs as a deposit is lined up at the branches. but that's that, that's not the nature of a,

of a bank panic today. today it happens in, in the minutes an hour. it's not in days and months. that's uh, that's a i agree with the previous commentator who said that we have a bank supervisory presence more than a banking crisis. the bank supervisors are there. i'm thinking particularly of the said the federal reserve and the federal deposit insurance corporation. were well aware of these banks, particularly 1st republic and silicon valley, had significant problems as much as 9 months ago. and their failure to act deserves much more scrutiny than it's gotten today. there has been a report by that sat in the s t i c. however, those were entirely superficial, and i, i think was congressional hearings to come in or research research on this. we will validate your previous speakers. a comment that this was largely

a supervisory problem and not a i a inherent banking problem. as a william, it was even better to comment about the supervisory problem. but to what extent did the markets themselves play a role in the collapse of not just 1st republic, but the, the, the of the us banks as well in the, in the markets smelled blood. there was a certain amount of manipulation market manipulation in short, selling that went on and did that contribute to the collapse of these us bank ships short selling a bank stocks we barrens you may, you may have to explain for us what short selling is before you give us the onset to yeah, i think one of the things that we have to remember is that the market starts to smell the blood in the water is because the supervisors are the bad managers put the blood there. but don't forget, as interest rates rose, not all banks have problems well managed banks were able to manage your liabilities, keep the depositors, and offer them services that retain their highly valued customers. what we found

was that 1st republic, silicon valley, and the crypto banks that specialize in crypto currencies failed because the managers did not put in place the proper governors and risk management structure that most banks had in place. take, for example, silicon valley bank. they operate for over 9 months without the chief risk officer . and the chief risk officer is one of the most important people in a bank, because that person's responsibility is to make sure that they've taken to account all foreseeable risk. and then the environment that we were in, it was absolutely clear that as an inflation started to take off, the federal reserve is going to fund raising embrace, i guess we, i agree that the federal reserve raise rates that historically fast paced, but face should not have been caught salt flood for the that, that their customers pad it. and now we do have a new technology with bank panics, are now induced or, or, or, or capitalized by social media. so in silicon valley, which had people that were subject to a lot of groups,

think you have one social influence or put out of a huge message. it via their social media. that's that hates. pull your money out because silicon valley is not a safe, is your thing. and suddenly everyone did that. well, the best managers should have known that their people, their customers, were subject to such a group thing and had the 1st of 5, their, their, their asset management and their liability management. so not all bank software because interest rates went up and the evidence for that is look at the larger bank, jp morgan city bank. and as a bank of america, they were all subject to the same interest rate environment. they, they are very well look at the other smaller banks around the country, the other 4000 banks. all of them managed to survive quite nicely. unfortunately, markets are slowly getting the funded their head that perhaps the us banking model of having community bank servicing small businesses is not advised the model that is wrong. and that has to be something that the supervisors come out and absolutely

state explicitly that they fell on their job. they fell off on their jobs because of that markets. punny. not because of 80 wrong with the banking system, per se, whatever it is, perhaps something more. it's not a question, i'm sorry, but is there something more serious going on here in but there are those in the markets who would be willing to push small. uh, uh, struggling banks towards collapse so that the federal deposit insurance corporation, the f b i c steps in 1st and then gives any potential buyers that are tons and there are always nefarious investors. also, you're looking for vulnerabilities, but you're a short attack. that is a, an investor that tries to attack institution by selling their stock and try to induce their price decline and panic their, their management would never succeed if there weren't fundamental vulnerabilities. and one of the things that, that we found in the past were that speculate is always lost money unless there was something to win on. and, and we saw in, in very many different places,

even including, as, as bigger. it's too much like the united kingdom george source was able to break the pound because inspect, because he was able to induce us so much volatility in the foreign exchange market that the british pound suffered. so. so there are many speculators out there. but if you have a sound institution, you actually will find that speculators which try and they'll fail. what the reason why they succeeded with silicon valley was that there was something there to keep. what are the implications of this for, for your pin bank, your pin bank, some of that, but the, the 2 systems of a very different regulatory systems. is there any similarity between what's going on right now in the united states with credit suisse and a new b s, i think is we find there are minimal banks into us just a regional bank, specialized bank, little the smaller banks, which is good actually in terms of supporting the communities in particular sectors

in your lives been huge amounts of consolidation that took place off to the financial crisis. or we have many fuel banks and they are very tied tree regulators . i mean, remember in the us, of course, under president trump, there was a deregulation, particularly of the smaller banking sector, which is i think, one of the problems that we facing right now with the issues that have arisen in, in europe. it isn't quite like that, but people still can move their money out very fast. the way in which the system now works is such that we've electronic transfers. that can be a run on the bank, which can be very, very quick. and one of the things that happened, of course, with crazed risk, which indian had to be bought out by us has been indeed this lack of all the phrase if you like that. so the bank was going to be going concerned. instead of going ahead looking forward so you can have the same things happen in your material . but the real concern is this, because it is a vision,

but it is an issue as to this is inability to the banking system at the time when interest rates are rising so fast. and that would be by the loans without a doubt. and a lot of lending was given when interest rates were low and there's a loss commercial that commercial property that jobs that, that we may indeed see that it, there is a type name coming ahead in lending and credit conditions. we've seen that already in europe happening, loveless, willingness to lend a lot more concerned as to what the implications would be trying to avoid having anything like what's going on in the us right now, spread into europe. and that is bought, that is bob for businesses by for consumers is also schools bad for the economy as a whole. and there is a concern that we've interest rates continuing to be raised for central banks. we might see a slow dying become a new foster, right? some would otherwise have been the case on already. of course, in the us want us to,

to the post recession because of everything has been happening later. the see how possibly 2024, calling this all big banks, a bad thing. and where's the bite, the administration? and all of this, there was a long held view that the government would block banking john's getting any bigger vibe himself about to take a tougher stance on the bank. much is that when he came into office and yet he so that he was pleased by the 1st republic deal. he said he would make sure that the banking system is safe and sound a yeah. so yeah, we have in this country. yeah. and in many countries, what we call too big to fail, thanks. and if you think about that term, what it means is, uh, the thing is either too big or complex or inter related that it will not be allowed to fail. that, that implies a significant government taxpayer subsidies up to that bank because they will never fail so. so whenever you have a boss on the road like we're experiencing now,

deposits either fleet voluntarily to those 2 big to fail safe banks for involuntary li, as in the case of the 1st republic, where the government acts as a chaperone to make the j. p. morgan chase, even larger than it was before we. we had other banks that were interested in buying for a script, but that were not too big to fail themselves. and i'm thinking in particular the pnc bank, but i'm disappointed in the administration in that they actually subsidized the purchase of 1st group cover to buy jp morgan, thereby making j. p. morgan even larger and more so big to fail than it was before. this is the most finished piece of business from the last financial crisis in 2008, where we, we failed to right size these institutions. now, if we're willing to live in

a world of basically socialized banks that are more of the state, then we'd like to make the conscious public policy decision. but in steps that we tend to pull ourselves into thinking that we have a competitive system. we're really what we have in the us is, is a subsidized to the big to fail. after all, the too big to fail. banks account for about 60 percent of all banking assets in the us. and as william pointed out in the us, system is not as bank separate as, as a european system. but we, we have this dichotomy, and ultimately we're going to have to reconcile williams is jp morgan too big to fail is jamie diamond. the man who runs at to pa, for one of the changes of us banking, consolidating around a handful of these 2 big to fail banks for the both for,

for consumers who of course, will face less choice. and for the government. the notion of having very big dices something the uh, administration uh, all administrations and banks supervisory regulatory agencies are well aware of. and i think they would have rather pnc bought the 1st republic unfortunately by law . the if the i see was mandated to always accept the least cost solution, and jp morgan outbid pnc simple as that. now what we can do going forward is to make sure that the, the competitive pressures are restored and that jp morgan isn't given of unfair advantage just because they're to be and you're absolutely right. when you have a large bank dominating so much of the bank is just them with so much of the assets . and if they make a mistake, then surely the taxpayers will be on the heart. and so that means that going forward, the regulators and supervisors are or have

a even tougher job to make sure that these large banks do not fail. so we should put much more effort going forward on the supervisory responsibilities for making sure these based operate properly. what we saw, what we see, unfortunately in the us congress, is a move in toward changing the regulatory structure so that smaller banks get more emphasis. and we reverse some of the, the regulation that went on the past. the purpose of the truck and ministration to regulation efforts was to focus all of the supervisor attention, or at least more of it onto the sceptically important things because of any one of these banks failed. it would be a catastrophe for not only the us financial system, but also the global financial system because they are so inter related and so international. and so global vicki, to what extent has the, the increasing volume and complexity of a banking and trading made banking risk, you know, safe since the 2008 financial crisis crisis to, to europe have have its fair share of, of, to big to fail. banks,

of course it does, i mean if you look at each country, there are a handful of banks to donate. i mean, of course, in switzerland which is what has been the focus of attention recently. we really only have 2 big banks, and now there's only one. so you can imagine what that means in terms of too big to fail. absolutely. we do have less of those banks which have to have in order to operate to prop. uh, so the resolution regime, if you like, we've just been agreed not just across the you, but also internationally. and those rules are still there. but this seems to, in many ways that have change when the need arises. like for example, what was so in europe with increased risk where i ended up that it was boned holders who lost out o special bone holders who lost off significantly, whereas at home is low stop less so. so rules can be changed overnight. so even those who invest in the banks not just have money deposit, this is becoming

a considerably more risky situation. but what's going on right now in your visit? talk of possibly increasing the deposit guarantees that are offered because a lot of people just because i'm in charge and that could cause a run at any point in the us. so the positive guarantee is a $250000.00 that may go up so far with all the bank failures we've had in the last few weeks. all the parties have been guaranteed most of those up to 250000 pounds in new york. it's a lot less, it's about 800000 euros across the u, and it's 85000 pounds v k. there is now talk of increasing that, of course, just as we've been hearing from you other contributors that could well mean. of course, the tax period, the end of may have to folk have no money to support those banks, but that makes it also a lot more difficult to let any of those banks go. because you're not guaranteed so

much for the funding you've got to it's, i'm going and i think we're going to see probably this move to customer addiction continuing, but also i think supervision of those big banks tightened as well. to make sure that the all new risks attached grieves how worried should the likes and be at any one watching be worried about all of this. is that going to be another credit crunch as, as i was, of course the one that precipitated that the, the 2008 financial crisis, or should we rest easy but, but the banks and the governments know what they're doing and i'm just going to worry about yeah, i don't, i don't know a lot of credit across, but certainly the outside of much of this is that the banks will be much less eager to land. and that's probably less of a problem in the us where banks are not. that is significant. a part of the financial system as opposed to lead a u d u, where it is highly bank center. i will point out one feature of the us banking

system that i think is very concerning. and most of your listeners probably have never heard of this, but there is a to trillion dollar government facility or halting 2 trillion dollars. that lands in discriminatory 2 bags. in, in doing so, it masks many of the problems that these 4000 banks of william alluded to earlier, have thereby interfering with the market discipline process. that system is called the federal home loan bank system. it has been around for 90 years. however, it has never been as large and is uh, systemically important as it is today, and it's fingerprints. it's fingerprints are all over the banks failures that we're talking about today all over them. for example, if it had almost $30000000000.00 in house standing loans to 1st for public and

comfortable amounts to some of the other banks, it fails. so that's, that's a policy, a feature of the us system that, that european banks do not have to be concerned about. okay. a very, very quickly, according as it answers the question, should i be worried? yes, no, maybe i would be cautious time. the people are paying a lot more to attention today to the, the metrics of what is mature in not ensures a, it's a reasonable thing, it's not panic. so your money to a, either a money market mutual fund or too big to sell day. okay. the, i'm afraid we're going to have to leave it. we're out of time. many thanks indeed, willingly vicki, price and quantity as early as always, thank you for watching. don't forget, you can see the program again at any time by visiting the websites of l 0 dot com for further discussion join us a facebook page that's on facebook dot com forward slash ha. inside story out of

course, you can join the conversation on twitter handle at a inside story from the adrian fit again and the team here though, thanks for watching. we'll see you again the the, a sanctuary for journalists. it was a hey, from the, from the world and shelter for civilians. refugees, web ex got throwed into the garden during cam boat is bloody civil stuff. flooring us up to here and suddenly we have a ton of x on the canal ruler shed. take anything of value out of the hotel,

term body lip, no more hotels. on all, just reviewing the headlines, dissecting what they say, which has decided to go live. was there really a full scale innovation, exposing how the media is used to shape the one factor that never seems to make a difference is true. it never happened. and how political power can suppress free speech. you tried to record that need to be in public police and lots of seconds. we are on the coast of the listening post you guy to the media on tuesday around. we don't simply focus on the politics of the conflict. is the human suffering that the report on we brave bullet in bonds and we always include the views from all sides. the

.