Elliott: understanding the new turmoil

Global banking turmoil is not new but it’s always different. Yet previous events can teach valuable lessons which are invaluable right now, according to ANZ Chief Executive Shayne Elliott.

Speaking with bluenotes on video, Elliott says it is important to understand the context of the latest market ructions and how the causes are quite different than the factors behind the global financial crisis of 2007-09.

“Over the last 250 years, there's been 39 financial crises of some shape or form, right? So on average, they're every six or seven years. And I remember when I first started in banking in the eighties, that was a rule of thumb we were all taught. Every five to 10 years there's something going on in the world,” Elliott says.

But people who are concluding today that this is another GFC are being hasty, he suggests, pointing out the causes of each event are quite different.

“It's like that old saying, you know, that history doesn't repeat, but it rhymes. There are lots of rhymes here that we can see in previous turmoils or crises, including the GFC, but actually, when you really get the microscope out, the causes and what's going on here are really, really different than the GFC,” Elliott says.

“The GFC was fundamentally a crisis around the quality of assets and the loans that banks make, and that's not what the risk is here. This is a different issue. This is really to do with the global war on inflation and how central banks are raising rates very quickly in order to combat that, and that has casualties. ”

Elliott also thinks a key difference this time is regulators implemented changes after learning lessons from the GFC.

“You've seen that in the last week or so in Europe and you've seen it in in the United States,” he explains. “The ability for regulators to come in with the sort of overwhelming force really quickly to resolve a situation, to calm the markets down.”

Elliott says ANZ is comfortable with its capital, liquidity and risk settings, emphasising these are naturally revisited more often during a market event.

He says the experience of COVID provided a framework for how to deal with emerging threats – and this is coming in handy again.

“We've dragged out a bit of a framework that we used, funnily enough, in COVID, to sort of organise the work and make sure we’re focused. Something we developed, which I think has worked really well. It's a four point plan and people like four or five point plans, but the four points are protect, adapt, engage, prepare.”

“The first thing we’re going to do is protect the bank, our balance sheet, make sure we can continue to operate, liquidity, capital, protect our people, look after our customers,” he says.

“(We need to) adapt to the new world. Liquidity is harder to come by, it's more expensive, right? Our customers have different needs. We need to adapt, just like we had to adapt to working from home, we have to adapt to this new world of capital markets.

“We have to engage. Our people are asking more questions, our customers are certainly asking more questions – what do they need to do, what does it mean for them – our regulators and community. And then prepare – prepare for the future. So just like COVID, the world never went back to the way it was pre-COVID.

"As a result of this, I can almost guarantee regulators around the world are thinking of new things they need to put in place.”

Elliott also discussed the history of crises and background to this one in more detail. Watch the video or read the transcript for the complete discussion.

Andrew Cornell is Managing Editor of bluenotes

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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