A week of banking turmoil

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Washington: This was the week that the global banking system finally started to crack under the weight of historic interest rate increases. It began last Friday, with the collapse of start-up lender Silicon Valley Bank. US authorities guaranteed all deposits and offered liquidity to the banking system, but fears spread. By midweek, the troubled Credit Suisse was offered a safety line from the Swiss central bank and US lenders were tapping the Federal Reserve for billions in liquidity. On Thursday, Wall Street banks agreed to prop up First Republic, a California-based lender. Central bankers were left wondering whether they will endanger financial stability if they continue with the rate rises necessary to tame inflation. The question on everyone’s minds is: what will break next? It was only a matter of time before the fastest synchronised rate hiking cycle by global central banks in 50 years strained another segment of the financial system. The rapid reversal of a decade of loose money has already revealed weaknesses, from the UK pension market crash in September to recent crypto-market chaos. Web Desk