A chief strategist of the Wall Street bank, Morgan Stanley has pointed to a big drop in lending amid tightening standards,  meaning the “credit crunch” in the United States has started. Mike Wilson claimed that the banking crisis, which started with the collapse of Silicon Valley Bank (SVB), has led to a tightening of lending standards.

Wilson’s warning comes over a month after massive deposit runs caused two lending banks, Silicon Valley Bank and Signature Bank, to fail within days. A third lender, First Republic, ended up being the recipient of a $30-billion rescue from top Wall Street banks in the form of deposits. The big players stepped in over investor fears that First Republic would become the next institution to fail.

According to a report by RT, in a note seen by Business Insider, Wilson said that lending levels have seen the steepest decline on record over the past two weeks. He attributes the drop to US banks’ attempts to offset the breakneck pace of deposit flight in the month since the collapse of SVB.

“The data suggest a credit crunch has started,” the analyst said in a Sunday note, noting that $1 trillion in deposits has been withdrawn from U.S. lenders since the Federal Reserve began its series of rate hikes nearly a year ago.

“To those investors cheering the softer-than-expected inflation data last week, we would say be careful what you wish for,” Wilson warned, pointing to the March Consumer Price Index report that revealed the inflation rate has been climbing less than projected. “If/when revenues begin to disappoint, that margin degradation can be much more sudden, and that’s when the market can suddenly get in front of the earnings decline we are forecasting.”

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