Bank credit conditions are tightening, and the negative impact on the economy from the ongoing banking crisis is going to be significant because small banks account for 30% of assets in the banking sector and 40% of lending, and small banks are facing three headwinds from 1) higher funding costs, 2) lower asset prices because of higher interest rates, and 3) more regulatory scrutiny. Our banking sector outlook is available here, key charts inserted below.
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