The crisis of Western banks.. to where?

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Within one week, the Western financial and banking system, on both sides of the Atlantic, faced a financial crisis that led to the collapse of three US banks, with total assets amounting to $333 billion, including the Silicon Valley Bank as one of the largest US banks, which was acquired by First Citizens Bank. And another Swiss one, after it suffered from a lack of liquidity as a result of many accumulated factors, knowing that some of them continued to suffer from the repercussions of the previous financial crisis in 2008, such as the “Credit Suisse” bank, as the Chairman of the Board insisted, a few hours before the acquisition of Credit. Suisse by UBS Bank, that his institution’s investment is sound and profitable.

Although the financial crisis could now be remedied by providing support with printed money, as the US Federal Reserve provided $300 billion to US banks that requested urgent aid, and the Swiss Central Bank provided $54 billion to Credit Suisse, although this did not avert its collapse. Its acquisition by UBS and the write-off of $17 billion in bonds issued by Credit Suisse sparked much criticism from investors.

Despite this, the measures taken by printing money are among the easy solutions, and they are temporary palliatives, not solutions to a structural crisis that requires permanent solutions. It is also part of the structural crisis that the capitalist system suffers from, which usually affects its financial and banking system first, which is what he expressed. The famous investor, Carl Icahn, said, “The American economy is in distress because of the weak leadership of the economy and inflation,” adding that “the economic system is collapsing.” As for the President of the European Central Bank, Christine Lagarde, she stated, “There are new risks threatening the economy.”

Meanwhile, Moody’s reduced its view of the US banking system from stable to negative. This seriously raises the risks surrounding foreign investments, especially Arab ones, in Western banks and financial institutions that do not enjoy guarantees, especially after US Treasury Secretary Janet Yellen indicated the possibility of fully guaranteeing deposits, before limiting them to only $250,000. As US Federal Reserve Chairman Jerome Powell said last week. After the decision to raise interest rates by 0.25%, “what matters to his institution in the first place is reducing inflation rates and not the stability of the financial system that can be contained.” A statement that confirms what the investor, “Icahn”, said about weak economic management, which may cause new crises, as predicted by “Lagarde”.

In addition to the structural imbalance of the financial system, global geopolitical crises, especially the Ukrainian war, exacerbate these financial crises due to the absence of economic and financial cooperation and coordination between countries with large and influential economies, such as the United States, China, the European Union, Russia, and oil-producing countries, which live in a state of disparity. With penalties and counter-punishments. This means that most of the indicators tell us that the most severe and influential financial crises are coming, which in turn requires a re-map of Arab investment distribution to reduce expected losses, with a focus on domestic investments, especially since the Gulf economies have witnessed rapid developments in recent years that opened many new areas of investment. Including the field of renewable energy, modern technologies and artificial intelligence, which require large investments. Some emerging economies, in turn, provide viable and stable areas of investment, in addition to investments in Western countries that can be developed by following them closely and avoiding the risks surrounding them, which have recurred over the past few years.

* Expert and economic advisor