JPMorgan analysts warned Monday that the bankruptcies of First Brands Group and Tricolor Holdings have ignited a new wave of credit anxiety, driving up banks’ funding costs and shaking confidence in the financial system’s hidden ties to private equity firms and hedge funds.
The Jamie DImon-led bank said on Monday that these failures are driving up banks’ funding costs, forcing investors to demand higher returns for holding financial stocks amid growing unease about opaque ties between lenders and non-depository financial institutions (NDFIs).
The warning followed last week’s intense sell-off in US bank stocks after two regional lenders disclosed exposure to alleged borrower fraud, as Cryptopolitan reported.
Banks raise funding costs as investors react to NDFI exposure
In a note to clients titled “NDFI exposure analysis: lack of disclosure drives higher implied cost of equity,” JPMorgan said the global bank sell-off was the result of poor risk management and weak disclosure practices.
“The recent global banks sell-off was triggered by poor risk management, in our view, as shown by First Brands supply-chain exposures but more importantly, very poor disclosure in relation to NDFIs…
