Business leaders see a crisis

Recent problems in the US banking system may well lead to a "full-scale financial crisis" on par with the Great Financial Crisis, a survey of business leaders has found.
In April, Oxford Economics conducted a survey of the leaders of its client companies. On average, they gave a one in three chance of a serious financial disaster. More than half of survey respondents said that either a tightening of credit or a full-blown financial crisis is a significant risk in the medium term.

A still-smoldering banking crisis that began in March after the collapse of Silicon Valley Bank could pose a future threat to the economy, the survey found.
With interest rates higher as a result of the Federal Reserve's campaign to raise rates against inflation, and especially after banks began to fail, financial institutions became much tighter about lending. This makes it harder for businesses to hire and retain employees, and in some cases, to keep their heads above water.

"What turns a struggling business into a failed business is that when the bank pulls the plug, the company runs out of options," James Knightley, ING's chief international economist, said in a comment this week. "Job loss is the inevitable consequence."2
The credit crunch and its impact on businesses could play a major role in determining whether the US economy enters a recession in the coming months. Banking problems have worsened the outlook for the economy and the labor market, which have so far defied recession forecasts.
"While the global economy has proved resilient, problems with the banking system have persisted since early March and raise concerns about a potential major crisis," researchers at Oxford Economics said in a survey comment.