The banking industry is currently experiencing a state of unrest following the collapse of Silicon Valley Bank. The turmoil has left experts uncertain about the future of the sector, with some predicting the collapse of even more banks in the coming months.
Man Group CEO, Luke Ellis, addressed these concerns at a Bloomberg conference in London on Wednesday.
Ellis warned that the crisis in the banking sector was not yet over, and predicted that “significantly more banks” will fail within the next two years.
He cited smaller and regional banks in the United States, as well as challenger banks in Britain, as being particularly at risk.
The Impact of Social Media
Ellis also noted that the growth in social media has accelerated how quickly concerns about banks circulate.
“Things happen at a much faster speed. Whether that’s a crisis or it’s good news,” he said. This increased speed has made it challenging for regulators to stay ahead of the curve when it comes to financial stability.
Despite these concerns, a spokesperson for the Bank of England has reassured the public that the UK banking system remains “safe and sound”.
Meanwhile, central banks around the world have responded to the turmoil with coordinated measures to ensure the flow of cash between banks.
Hedge Funds Profit from Volatility
Many hedge funds have been able to profit from the banking sector’s recent volatility by betting against banks.
This has created a unique opportunity for investors to capitalize on the chaos in the sector.
Seema Shah, chief global strategist at Principal Asset Management, believes that policymakers have done enough to “ringfence” the current issues in the banking sector. She is optimistic that the current crisis can be contained, and that the sector will eventually stabilize.
Alexander Chartres, investment director at asset manager Ruffer LLP, however, takes a more pessimistic view. He expects a recession in the United States and advises investors to diversify their investments across different asset classes.