BlackRocks Fink Says SVB Failure Shows Cracks In Finance System

(Bloomberg) — The chief executive of BlackRock Inc . Larry Fink said the banking crisis could worsen after the collapse of Silicon Valley banks, raising fears of cracks in a financial system built on more than a decade of easy money and low interest rates. :

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The dominoes begin to fall. Fink, president of the world's largest wealth management firm, made the announcement via email Wednesday. – It is too early to say the extent of the damage.

Fink, 70, said that while regulatory measures have so far contained the problem, last week's collapse of Silicon Valley Bank and Signature Bank is reminiscent of "staggering financial crises" of the past, including the savings and loan crises of the late 1980s and early 1990s. . Bankruptcy and Crisis of Orange County, California, 1994

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"We don't yet know if the effects of easy money and regulatory changes will affect the entire regional US banking sector (such as the loan and savings crisis) and lead to more foreclosures and foreclosures," Fink said. "It's been almost ten years and I've saved over a thousand dollars."

Fink said some banks may have to cut back on lending to shore up their balance sheets, and regulators are likely to impose tighter capital standards.

The economy and financial system are entering a new period as inflation rises and the Federal Reserve raises interest rates, Fink said. Fink said inflation is likely to be between 3.5% and 4% over the next few years.

sharp criticism

In the decade since Fink began writing his annual letter to corporate executives, BlackRock's client assets under management have grown to $8.6 trillion, with significant stakes in companies around the world. The company's development is dominated by Fink's letters, usually published at the beginning of each year, which give the company a strong voice on social and political issues and draw increasing criticism from all sides.

This year's version of Fink's letter represents a setback after companies and Fink himself faced heavy criticism for investing in environmental, social and governance goals, or ESG.

BlackRock Struggles to Survive ESG Crossfire; graph

On the left, progressives complain that BlackRock is doing little to fight climate change. Meanwhile, conservatives and many Republican lawmakers criticized the company for "crony" capitalism. Republican officials in Louisiana and Florida, among other states, received more than $3 billion in campaign placements.

Fink typically writes two letters: one as CEO on behalf of the firm's clients on ways to improve corporate executive performance, and a second letter as BlackRock chairman to the wealth manager's shareholders. This year, Fink combined them for both audiences.

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"Part of supporting our clients involves talking to them about the things that are important to their investments," Fink says. "I have long believed that it is important for leaders to use their voice in the world, and there has never been a more important time for me to use it."

Fink's position on sustainable investing has also changed.

In a letter to CEOs last year, Fink reiterated his criticism of ESG investing, saying the carbon economy would create "the biggest investment opportunity of our lifetime" and leave companies that don't adapt, regardless of industry, behind. .

“Every company and every industry will be transformed by the transition to a zero-emissions world. The question is, will you lead or will you lead? Fink wrote in 2022.

Fink was further measured this year, noting that the firm still sees climate risk as an investment risk and that BlackRock has clients who want to accelerate the transition to a low-carbon economy and some who don't.

"The role of an asset manager like BlackRock is not to create specific outcomes in the economy, and we don't know the ultimate path or timeline for transformation," he said. CFOs should not be "environmental policemen".

"Some of the most attractive investment opportunities in the coming years will be related to transition financing," he said. "For clients who choose, we connect them to these investment opportunities."

Fink outlined the company's key business priorities, from investing on behalf of retirees and other clients to managing risk through technology, managing nearly $400 billion in net new money flowing into its long-term investment funds through 2022, and highlights; stock price performance;

BlackRock shares have returned a total of nearly 7,000% since the company went public in 1999. They are down about 10% so far.

More from Fink's letter.

Reflecting on his leadership role last year, when he turned 70, Fink said, "My most important responsibility now is to grow and lead the leaders of the company." The firm continued to explore digital assets even after the collapse of FTX. And Fink believes that blockchain technology can be used for stocks and bonds. Bond-linked exchange-traded funds posted a record $123 billion in net inflows last year. Fink said he expects the ETF industry to reach $15 trillion in the next few years. The private equity and infrastructure firm raised $35 billion in client capital for its options business.

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