BlackRock Chief Executive Larry Fink issued a stark warning on the state of financial markets, saying the banking crisis triggered by the collapse of a Silicon Valley bank could spread, but it was too early to tell. In his annual chairman letter to investors, Fink said: “We don’t yet know whether the consequences of loose monetary policy and regulatory changes will spread across the U.S. regional banking sector (similar to the S&L crisis), with more foreclosures and closures on the horizon. coming.” The chief executive of the world’s largest asset manager said the Silicon Valley Bank failure — the second-largest in U.S. history — was a classic example of an asset-liability mismatch in which the bank didn’t have enough ready-made assets to sell to Match their deposits with their value. The collapse prompted an extraordinary bailout by regulators, who backed up all deposits in failed banks and provided additional funding facilities for struggling banks. Fink, 70, said it now seemed “inevitable” that some banks would need to scale back lending to shore up their balance sheets, and that there could be stricter capital standards for banks going forward. “It is too early to know how widespread the damage will be. The regulatory response so far has been swift and decisive action has helped avert the risk of contagion. But markets remain on edge. Asset-liability mismatches can be the downfall A second domino?” Fink said. The pressure on the financial sector continued on Wednesday, with concerns spreading beyond regional banks. Shares in Swiss bank Credit Suisse, which has a large presence in the US and globally, plunged more than 20% to record lows. The National Bank of Saudi Arabia, Credit Suisse’s largest investor, reportedly said it could not provide more funding. Fink said the first domino to fall behind years of easy monetary policy was a surge in inflation that led the Fed to hike rates by nearly 500 basis points since a year ago. “These drastic changes in financial markets have coincided with equally drastic changes in the global economic landscape — all of which will keep inflation high,” Fink said.