{"id":154873,"date":"2023-07-05T12:50:04","date_gmt":"2023-07-05T18:50:04","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=154873"},"modified":"2024-02-27T11:49:38","modified_gmt":"2024-02-27T18:49:38","slug":"key-banking-figure-says-banks-could-face-another-recession-like-2008","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/key-banking-figure-says-banks-could-face-another-recession-like-2008","title":{"rendered":"This Key Banking Figure Just Gave a Dire Warning\u2014What Should You Be Preparing For?"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC9114759294\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The leader of the bank for central banks\u2014the <a href=\"https:\/\/www.bis.org\/\" target=\"_blank\" rel=\"noreferrer noopener\">Bank for International Settlements<\/a> (BIS)\u2014is sounding the alarm.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Just this week, BIS general manager Agust\u00edn Carstens told reporters that \u201cThe global economy is at a critical juncture.\u201d And according to the bank\u2019s just-released annual report, if inflation isn\u2019t tamed and consumer prices remain high for much longer, banks could see credit losses of a \u201csimilar order of magnitude\u201d to those of the 2008 financial crisis.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The comments are jarring, particularly on the backs of three bank failures earlier this year. BIS\u2019s typical stances\u2014which are usually more reserved\u2014also lend gravitas to the statements.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">\u201cThe resilience of the financial system will be tested again,\u201d the report reads. \u201cPockets of vulnerability remain. Recent events have shown how the failure of even comparatively small institutions can shake confidence in the overall system.\u201d<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Why the Cause for Alarm?<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">According to BIS, elevated prices and <a href=\"https:\/\/fred.stlouisfed.org\/series\/GFDEBTN\" target=\"_blank\" rel=\"noreferrer noopener\">historically high levels<\/a> of both public and private debt is placing stress on the banking system. Inflation and the subsequent policy moves needed to fight it play a big role too.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">\u201cIt is quite common for banking stress to emerge following a monetary policy tightening\u2014in as many as a fifth of cases within three years after the first hike,\u201d the BIS\u2019s annual report, released last week, reads. \u201cThe incidence rises considerably when initial debt levels are high, real estate prices are elevated, or the increase in inflation is stronger. The current episode ticks all the boxes.\u201d<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The report comes just after the <a href=\"https:\/\/www.biggerpockets.com\/blog\/summary-of-june-2023-federal-reserve-meeting\" target=\"_blank\" rel=\"noreferrer noopener\">Federal Reserve\u2019s June meeting<\/a>, which saw no increase in the bank\u2019s benchmark rate. The decision followed 10 straight rate hikes\u2014one at each Fed meeting since March 2022. The hikes have helped inflation fall from over 9% to 4% in that timeframe.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">\u201cAdmittedly, inflation has come down from last year&#8217;s multidecade highs,\u201d Carstens said. \u201cBut these were largely the easy gains as commodity prices fell and supply bottlenecks eased. On core inflation, much less progress was made. And in much of the world, price growth in services\u2014typically hard to budge\u2014remains near its peak.\u201d<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">For these reasons, the Fed\u2019s pause will likely be temporary\u2014and more tightening could be necessary to get inflation under control.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">&#8220;The key policy challenge today remains fully taming inflation, and the last mile is typically the hardest,&#8221; Carstens said. &#8220;The burden is falling on many shoulders, but the risks from not acting promptly will be greater in the long term.&#8221;<\/span><\/p>\n\n\n\n\n\n\n  <div class=\"lg:block\" x-data=\"{ ad_block_block_64a5bb04bb98b: popAds(1) }\">\n      <template x-for=\"ad in ad_block_block_64a5bb04bb98b\">\n        <a\n          :href=\"ad.linkURL\"\n          class=\"no-underline text-black\"\n          x-on:click=\"adClicked('https:\/\/www.biggerpockets.com\/blog\/key-banking-figure-says-banks-could-face-another-recession-like-2008', ad.sponsor, ad.title, ad.id, 'blockAdClicked', 'blockAd', '')\"\n          target=\"_blank\">\n          <div\n            class=\"py-4 border-b flex flex-col flex-nowrap text-sm border-t px-0 rounded-none\"\n            x-init=\"\n              analytics.track('blockAdLoaded', {\n                referrer: 'https:\/\/www.biggerpockets.com\/blog\/key-banking-figure-says-banks-could-face-another-recession-like-2008',\n                sponsor: ad.sponsor,\n                ad_title: ad.title,\n                ad_page_location: ''\n              })\n            \"\n            x-intersect:enter.once=\"adViewed('https:\/\/www.biggerpockets.com\/blog\/key-banking-figure-says-banks-could-face-another-recession-like-2008', ad.sponsor, ad.title, ad.id, 'blockAdViewed', 'blockAd', '')\">\n            <div><span class=\"text-xs text-slate-light block bg-slate-50 p-1 inline-block rounded-md\">Sponsored<\/span><\/div>\n            <div class=\"flex items-center text-sm space-x-4\">\n                <img :src=\"ad.imageURL\" :alt=\"ad.imageAlt\" class=\"h-10 w-10 object-cover rounded-full\">\n\n                <div clas=\"text-sm\">\n                    <span class=\"font-bold block\" x-text=\"ad.sponsor\"><\/span>\n                    <span class=\"text-slate\/80\" x-text=\"ad.description\"><\/span>\n                <\/div>\n            <\/div>\n\n            <div>\n                <span class=\"font-bold\" x-text=\"ad.title\"><\/span>\n                <p class=\"mt-2 text-slate\/80\" x-text=\"ad.body\"><\/p>\n                <span class=\"mt-2 text-themeBlue block mt-2 underline\" x-text=\"ad.linkTitle\"><\/span>\n            <\/div>\n          <\/div>\n        <\/a>\n      <\/template>\n  <\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">What it Could Mean for Real Estate<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If a banking crisis does come to fruition, there could be sweeping impacts on the real estate world. For one, lending would tighten considerably, making it difficult to finance deals and developments. Demand would then fall for housing, which could push prices downward.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Would they crash, though, similar to the Great Recession? That would require a number of dominoes to fall. There\u2019d likely need to be widespread job losses, which would make it hard for many to make their mortgage payments. That would lead to a wave of foreclosures and a glut of housing supply that could tank prices.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Fortunately, that\u2019s a lot of what-ifs. And according to BIS, there\u2019s still a chance any huge losses can be avoided.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">\u201cThere is an emerging sense that the global economy could achieve a soft, or soft-ish, landing,\u201d Carstens said. \u201cWe all hope it does, but we must be ready to tackle the significant risks that stand in the way.\u201d<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_1b1afe7c66aae2802aa8acccfad4022d\" class=\"visibility-group  hidden\">\n        \n\n<div id=\"hero-block_badd46c1cd3e3d29b89b635402c91ac0\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-theme-gold-light-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-gold-color has-text-color has-large-font-size wp-block-paragraph\" style=\"font-style:normal;font-weight:800\">Get the Best Loan Today<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color wp-block-paragraph\" style=\"font-size:16px\">Find trusted, <em><strong>investor-friendly<\/strong><\/em> lenders who specialize in your strategy. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<div id=button-custom-event-block_a7a5d22b485ae16b748465dc4f2eac71 class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/business\/finder\/lenders\" x-on:click=\"window.analytics.track(&#039;Blog Block | B2C Marketplace Lender Finder&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/key-banking-figure-says-banks-could-face-another-recession-like-2008&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Find a Lender<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/Marketplace-Blog-Blocks-Lender-v3.png\" alt=\"investor friendly lender, investor friendly real estate loans\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color wp-block-paragraph\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/signup\" x-on:click=\"window.analytics.track(&#039;Blog Block | Acquisition | Free Membership Signup&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/key-banking-figure-says-banks-could-face-another-recession-like-2008&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Could banks be facing a crisis as large as 2008? What did this influential banking figure have to say?<\/p>\n","protected":false},"author":613679,"featured_media":154878,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7383,7119],"tags":[],"class_list":["post-154873","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/154873","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613679"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=154873"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/154873\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/154878"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=154873"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=154873"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=154873"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}