Restoring confidence in the U.S. banking system is likely to be the Federal Reserve’s next focus following its latest interest rate hike, according to the former head of the  Federal Reserve Bank of Kansas City says. 
 
The Fed hiked interest rates on Wednesday by 25 basis points, in a move that Tom Hoenig believed to be necessary, or else they would have lost credibility in the fight towards inflation. However, he believes their efforts will now turn to bringing confidence back to the banking industry. 
 
“(The U.S. Fed) is now going to turn their attention to the banking industry, which they know is under stress as interest rates have increased in the United States by a factor of 20 or more in the last year — and that puts a lot downward pressure on asset values in the banks and they know that. So they are going to pay attention to that part of the economy going forward,” Hoenig, who is also a senior fellow at the Mercatus Center at George Mason University, said. 
 
The banking crisis fears, which began in the U.S., soon rippled across global markets, including Canada. 
 
“Canadian banks are much more diversified than their U.S. regional counterparts and they are known to hold higher capital. For this reason the Bank of Canada would not be as concerned with a banking crisis on their hands,” Jeremy Kronick, director of monetary and financial services research at the C.D. Howe Institute, said in an interview on Thursday. 

He noted that the BoC, along with other central banks, including the Fed, have initiated coordinated action to ensure global markets have enough U.S. dollars to keep liquidity and credit flowing. 
 
“The BoC has the tools if needed to restore confidence in the Canadian banks, but at this point, the Canadian financial system does not face the same risks as the U.S.,” Kronick said.