A decade after Lehman


Unlike during the Lehman Crisis, banks have stepped up capital buffers. Since then, the US economy has improved
Chief Investment Office04 Sep 2018
Photo credit: AFP Photo


2018 marks the 10th anniversary of the Lehman Crisis that sent shock waves through the global financial system. It led to the demise of Lehman Brothers – on 15 September 2008, the financial services firm filed for bankruptcy. The move eventually prompted massive capital raising exercises, to keep a number of key financial institutions afloat.

After relentless efforts to supply liquidity, the US’s quantitative easing (QE) finally came to an end in September 2017. The removal of QE and the normalisation of US interest rate policy – stimulus tools introduced by the Federal Reserve in response to the 2008 Lehman Crisis –resulted in US-dollar strength. It also induced stress in some corners of financial markets, particularly in the Emerging Markets (EM) of Argentina and Turkey.

As such, the European Central Bank’s (ECB) plan to exit the bond purchase programmes by end-2018 – and potentially similar steps by the Bank of Japan (BOJ) to normalise liquidity supports – may lead to pressure in ways that investors may not fully appreciate. This may include further weakness in European economies like Italy and other peripheral countries.

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