Just two days after the Silicon Valley bank bankruptcy, US regulators closed on Sunday, the New York-based Signature Bank, in light of expectations of an exacerbation of the crisis and its repercussions locally and globally.
According to economists, the full repercussions aren’t clear until now, especially in light of the failure to disclose all clients or banks that are linked to banks that have declared bankruptcy, which is a measure that some banks or companies may take to reduce the state of panic and loss of confidence.
The most prominent repercussions that have been evident so far have been the large losses of many banks in terms of the value of their shares in the global stock exchanges, in Asia and Europe, including the French Societe Generale bank, which lost about 4.49% of its value in the stock market, while the German bank Deutsche Bank lost about 7.35% of its value on the stock exchange, as well as in Britain, Parkys Bank lost 4.69%, in addition to the loss of the Swiss UBS bank about 4.35% of its value on the stock exchange.
The problem in the current crisis lies in the inability to return deposits, especially since about 86% of them are not possible.
As 151 billion dollars out of 175.4 billion dollars aren’t guaranteed at the present time, which means that depositors cannot obtain $250,000, which is the minimum that depositors can get in such a case.
Loss of confidence in US banks could lead to a catastrophe in the money market there, especially since the available data indicates that between 2015 and 2022, about 28 banks in America declared bankruptcy, which doubles the lack of confidence in the US banking sector in recent years, in While the last bank is among the 16 banks, they are the largest in the United States.
Bankers attributed the collapse to the continued rise in the benchmark interest rate by the US Central Bank, as it moved from 0% to 4.75% after the Federal Reserve intervened eight times within one year.
The global repercussions of the collapse of the two American banks are linked to what is happening within the financial sector and financial markets at the US national level.
The element of trust is very sensitive in the banking sector, while the size of the assets of the American bank doesn’t exceed 209 billion dollars, out of 22,860 billion dollars, the size of the assets of banks until the beginning of the year 2023.
This means that the assets of the bank constitute about 0.9% of the size of the banking sector in the United States.
Measures taken by the US Treasury indicate the start of immediate measures in order to restore some of the confidence that was lost in the banking sector.
On parallel, it’s too early to launch the domino effect, as happened in 2008, although current estimates indicate that the financial market will suffer losses estimated at $600 billion, as a result of what was caused by the global crisis and inflation, which forced everyone to raise interest rates and reduce the volume of liquidity flowing to the banking sector where it went to US Treasury bonds.
The aftershock in countries are vary.
The repercussions in the Middle East are more evident in Israel, due to the presence of a bank branch there, and the adoption of technology startups that rely on the bank to finance their projects.
Emerging companies operating in technology sector are greatly affected, while it hasn’t been fully announced in the Middle East.
Banks worldwide haven’t yet fully disclosed whether they have any deposits or investments in the banks that have declared bankruptcy, and that the extent of the impact becomes clear if full details are announced.
The American and global stock exchanges lost large sums in just 48 hours, as the bankruptcy made the American and global financial markets steadily affected.
The American stock exchanges lost about $100 billion, and the European stock exchanges lost more than $20 billion.
Economic experts rose a question whether the US federal policy was the cause of the bankruptcy? As the situation pushed by the US Federal Reserve has motivated many banks to invest in US treasury bonds in a huge way, which made the Silicon Valley Bank unable to meet depositors’ withdrawals, with about $42 billion out of $163 billion deposited.
On the part of clients, what prompted the American Central Bank to intervene directly to reduce the dangerous effects?
The New York-based Signature Bank that declared bankruptcy exceeds its assets by about $1,800 billion, which constitutes a global financial and economic shock, given that their clients are emerging companies working in technology, and they are companies in need of important financing for innovation and the contribution of the innovation economy to global economies, although the extent of the impact in the Arab region isn’t clear so far.
As for countries that are more closely linked to the American and European economies are affected more, including Saudi Arabia, Egypt, the UAE and Qatar, and that these repercussions will become clear during the next few period.
The repercussions of the collapse won’t be limited to the financial situation, as the other dimensions are represented in political and military aspects, including possible losses in the military arena.
The US administration will push for the non-occurrence of a major crisis in the banks, especially if the situation develops Towards more collapse, it will lead to another loss on the Ukrainian scene, which means that the global map will change more quickly, and unipolarity will be broken to the greatest extent, in addition to this turning point that makes the American pole fragile and vulnerable.
Several complications were raised by the announcement of the Silicon Valley and Signature Banks, as fear permeated the wealthy class and depositors in the United States, while the process of selling accounts at discount rates began.
This step leads to more panic and pressure on US banks in terms of cash withdrawals and transfers abroad.
The announcement of the two Banks collapse pushed mortgage rates to rise, and threatened the real estate sector, which occupies a large percentage of the work of banks in the United States, which raises major problems resulting from a possible real estate crisis, which exacerbates the situation, and thus poses real difficulties for the rest of the banks.
The collapse of countries’ economy, as the repercussions of the crisis in the American banks that acquire an essential part of the world’s liquidity, through US Treasury bonds, and are threatened through the US Congress’s refusal to exceed the limit that it had previously set, and therefore the cessation of paying these bonds, It has negative repercussions on the global economy, and may lead to collapses in the economies of countries linked to the US economy, and to stagnation in the economies of countries that depend on the US in their foreign trade.
Despite the great fears, hope hangs on joint moves by the US Congress and the US Federal Bank to stand by these banks.
Germany moved on Monday to calm fears after the bankruptcy of the American Silicon Valley bank caused a decline in bank shares, stressing that this decline doesn’t pose a threat to financial stability in the European country.