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Stress among small US banks may slow growth in 2023: Goldman Sachs

22 Mar '23
2 min read
Pic: Goldman Sachs
Pic: Goldman Sachs

As stress ripples through smaller banks in the United States., the tightening in lending standards among those institutions is expected to reduce economic growth this year, according to Goldman Sachs Research, which said lenders with less than $250 billion in assets account for about half of US commercial and industrial lending, 80 per cent of commercial real estate lending and 45 per cent of consumer lending.

Economists at the organisation lowered their forecast for US fourth-quarter gross domestic product (GDP) growth by 0.3 percentage point to 1.2 per cent year on year. The new estimate incorporates expectations for tighter lending and reflect in part a larger downgrade to investment spending, the organisation said in a note.

To the extent that banking stress that started with the resolution of Silicon Valley Bank has an impact in lending, it’s likely to be concentrated in a subset of small and medium banks, a report by Goldman Sachs economists Manuel Abecasis and David Mericle.

Goldman Sachs economists expect lending standards will tighten more, to a degree that’s greater than during the dot-com crisis, but less than during the financial crisis or the height of the pandemic.

For monetary policymakers at the Federal Reserve—unless bank stress significantly changes the outlook—their goal for the year will be to keep demand growth below potential to keep the rebalancing of supply and demand on track, they said.

Fibre2Fashion News Desk (DS)

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