Bank Crisis Will Mean Regulatory Rethink, Goldman Sachs Group’s Beth Hammack Says

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Bloomberg — The extent of the economic fallout from the banking crisis isn’t yet clear, but the turmoil will prompt regulators to take another look at rules governing the industry, according to Goldman Sachs Group Inc.’s (GS) Beth Hammack.

“It will force a rethinking in certain areas like around some of the bank regulations,” said Hammack, Goldman’s co-head of the global financing group and a member of the management team. “I think what you’re seeing now is close scrutiny of the banking sector to understand how everyone is handling those risk-management challenges.”

The collapse of three regional US banks have triggered upheaval in global capital markets. Central banks’ efforts to rein in inflation by boosting interest rates are the right course of action, Hammack said, but rising rates “create more instability” in markets and in the corporate outlook.

“So you need to be extra vigilant around liquidity and capital and risk management when you’re in that environment,” she said.

Goldman Sachs is expanding its global financing business within investment banking as the New York-based lender aims to make its revenue more “durable, recurring and stable,” she said. Net revenue for fixed-income, currency and commodities financing increased 47% in 2022, to $2.79 billion, reflecting higher revenue from secured lending, according to the bank’s earnings statements.

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Brazil is contributing to the expansion, said Hammack, who spoke last week in an interview at the bank’s office in Sao Paulo. “My visit here is a critical part of supporting our business in Latin America, which has been on just a tremendous growth trajectory over the past several years,” she said.

Goldman stepped in with loans as Latin American startups faced shrinking public valuations that made equity sales less attractive. Brazilian fintech Nu Holdings Ltd. (NU), known as Nubank, and digital retailer MercadoLibre Inc. (MELI) were among those that received financing from Goldman last year.

Sovereigns, quasi sovereigns and top corporate names still can access global capital markets, where borrowing costs are lower than Brazil’s domestic bond market, said Cristina Estrada, co-head of the firm’s investment-banking division in Brazil. “We’re advising our clients to be flexible and opportunistic to find the right market windows, because we do think those windows will present themselves.”

Americanas Bankruptcy

Goldman hasn’t been immune to troubles in Latin America. The firm holds 1.065 billion reais ($203 million) in credits to distressed retailer Americanas SA (AMER3) due to swaps transactions with the Brazilian firm, according to Americanas’s creditors list. The retailer stopped paying creditors after filing for bankruptcy protection in January.

Hammack declined to comment about Americanas specifically, but said “we feel very good about our credit-underwriting practices, and anytime there’s an issue anywhere in the world, we always go through many reviews to understand what went right, what went wrong, were there signals that could have been seen?”

Estrada said Goldman’s “appetite to help our clients in derivatives throughout the region hasn’t changed.”

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Hammack, the former global treasurer for Goldman and the former chief executive officer of Goldman Sachs Bank USA, also visited Brazil to promote diversity. As a member of the global inclusion and diversity committee, she and Estrada hosted a dinner for about 10 senior women in region, including company founders, CEOs and chief financial officers.

“It’s always great to get senior women leaders together because there’s an empathy and a connection that you find with like-minded folks who’ve gone through similar challenges,” she said. “It just helps to build friendships, but you can also build business partnerships based on that connectivity.”