Liquidity Landscape Q1 2023: GFC 08 Redux

Rapid monetary tightening in an environment of rising inflation is leading to increased market volatility and wider investor concern. While governments and regulatory agencies seek to calm investors, the first quarter of 2023 saw a continuation of the challenging market conditions of 2022. Recent bank failures both in the US and Europe are leading the industry to question whether markets are heading for repeat of the Global Financial Crisis of 2008. Technically the conditions are not the same, given the increase in banking regulations post-Lehman. Yet, with the banking sector saddled with loans below current interest rates and investors able to move money by tapping an App on their mobile phone, this means historic responses are obsolete. Regulators are also increasingly concerned about the impact on investors. With banks slow to raise interest rates on savings and government bond yields declining, investors continue to look for more lucrative opportunities in areas like crypto, extending the regulatory remit at a time when regulators themselves have few new resources. The stakes continue to rise on what exactly global regulators can do next.

This report has been compiled by Gareth Exton Head of Liquidnet's Execution + Quantitative Services EMEA , in partnership with Rebecca Healey, Redlap Consulting.