The high-profile banker also argued Australia could continue to trade profitably with China while aligning more closely with the United States and the United Kingdom on security issues.
While finance veterans have drawn comparisons between last month’sshock collapse of Silicon Valley Bank and the 2008 global financial crisis,Gorman said the latest shock was one of liquidity:having enough cash or cash equivalent to pay depositors. “In ’08 there was a credit crisis,what we have now is a liquidity crisis,” he said.
Echoing observations from other senior bankers and regulators,Gorman highlighted how,facilitated by technology,an enormous amount of money had been moved from SVB.
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“With the click of an iPhone,$US42 billion left one bank in one day. To give you a sense of the order of magnitude,in the financial crisis of ’08,one bank lost $US17 billion in a week,” he said. “So the rate of withdrawal was twenty times what it was then.”
Gorman’s talk – titled What happened to the concept:you can bank on it? – pointed out banks had repeatedly got themselves into trouble throughout history,but suggested a few steps to manage the risks.
One response was a “sandbox” approach – taking steps to limit the size of individual risks being taken and thereby guarding against “inevitable terrible decisions that creep into some of these places”.