- According to what scenario can the situation provoked by the collapse of two American banks develop? Does this banking crisis threaten to spread to the whole world?
Albert Koroev, Head of the Stock Market Experts Department, BCS World of Investments: “Bank raids are always a dangerous story, and regulators need to quickly stop this threat, first of all. From what has been announced, Silicon Valley Bank and Signature Bank depositors will receive their funds. A sharp collapse in the quotes of many banks can also have consequences, not only for American investors, but also for European or Japanese ones.
Fedor Sidorov, private investor, founder of the School of Practical Investing: “Now there are two possible scenarios for the development of events: either the regulators will extinguish the panic and prevent other banks from going bankrupt, or it will all get out of control. Currently, even the slightest bad news about some other banking organizations can lead to the fact that depositors will run en masse to withdraw their funds from the system. This will lead to the collapse of the European and American banking industry, which will subsequently spread to other countries and territories. If now the Fed and the European Central Bank can quickly provide assistance to structures that are on the verge, then perhaps the crisis will not develop into a global one.”
Ivan Samoylenko, Managing Partner at B&C Agency: “The first panic, which was at the beginning of this week, has now passed. The Fed intends to support the country's financial system, for which about $2 trillion is allocated. The ECB also said $53bn would be made available to struggling Swiss bank Credit Suisse. Regulators will take all possible measures to prevent the continuation of bank failures, and funds will be allocated further. So we can already say now that this whole situation will not escalate into a global financial crisis. Even despite the fact that many well-known economists and public figures have already called what is happening a crisis.”
Emil Yusupov, Partner at Intercession: “The nature of the current crisis is somewhat different than it was in 2008, but the decisions of the regulators will be similar. The Fed will start pumping money into the banking system through a variety of mechanisms, including buying back bonds that are currently being repriced from banks. In any case, there are all preconditions for the crisis to be overcome. This is also evidenced by the financial volume of support from the Fed, statements by large US banks that are ready to provide assistance to financial institutions affected by the current situation. Credit Suisse turned to the Swiss government for help, and they should also help. All the steps that are commonly called bail out (financial support measures) are aimed at localizing this crisis, and so that it does not spread as a result of a chain reaction to all other financial institutions.”
Vladimir Kovalev, TeleTrade analyst: “I assess what is happening as a real and very serious danger for banks and many of their clients - companies and individuals. The situation, of course, immediately reminded of 2008, when a chain of non-payments, which began with several large banks, led to the global financial collapse. However, it is precisely because of such an association, which has every right to exist, that everything is developing differently now. That crisis and its lessons were not in vain. The US financial authorities are trying to stop the severity of the risks at the very beginning, immediately, until the “domino effect” manifested itself and the banks began to collapse one after another.”
- Who will lose and who will benefit from the current situation in the financial sector?
Koroev: “As for the problems themselves caused by the growth of interest rates, the depreciation of bonds, so far the regulators have introduced measures to maintain liquidity. However, the Fed faces a choice - to fight inflation or stabilize the financial system. We will have to look for a compromise solution, but it will probably be pro-inflationary one way or another.”
Sidorov: “During a banking crisis, no one wins – neither any country, nor certain banks, nor the population and businesses, which may lose their savings. After all, the largest banks around the world lend to each other, acquire various assets (government debt, shares of companies or cryptocurrencies), and the fall in the value of such securities after rising rates from central banks affects the stability of the banking business as a whole.”
Samoilenko: “A banking crisis, when financial institutions do not cope well with rising debt or falling capitalization, leads to a decrease in their ability to lend. And this affects both businesses, which receive less money for development, and individuals (loans become less available). As a result, this is reflected in the economy as a whole, as output is reduced, consumption is falling. So during a banking crisis, only the most stable and largest financial institutions and the owners behind them benefit: they can buy bankrupt banks in such a situation at a lower cost than before.
Yusupov: “If you think about who can win as a result of this crisis, then in the US, the big banks will definitely remain in the black. Because the panic of depositors who rushed to withdraw money, which became the trend of this crisis, played in their favor. Money withdrawn from troubled banks has flowed to the big players. As in any crisis financial situation, the big players remain the winners, and small banks will also be saved with their funds. They, in turn, will receive new clients, new financial inflows and government support.”
Kovalev: “The general message is to save the sector by providing almost any necessary amount. Because then, if you miss the situation, it will cost much more. Therefore, there is a high probability of localization of crisis manifestations, "filling" them with money. Thus, it may be possible to prevent further bankruptcies of banks and their clients "along the chain" due to non-payments, to stop the outflow of deposits, the systemic banking crisis. Although at the moment these actions of the regulators will require additional funds, which may stimulate higher inflation.”
- How can the banking crisis in the US affect the Russian financial system?
Koroev: “Russian assets, due to the effect of sanctions, are now largely removed from American capital and investors, so we have not seen a significant impact on the dynamics of Russian stock and bond quotations. At the same time, if the situation develops and accelerates the approach of a global recession, this will affect commodity prices, which is negative for the Russian economy.”
Sidorov: “Sanctions from the West have actually cut off the Russian financial system from the world one – this is an unexpected plus for our country. The banking crisis in the US and Europe in this situation is unlikely to have a strong impact on the banking system of the Russian Federation. Contacts with foreign partners are reduced to a minimum, so there are no serious risks for our system.”
Samoilenko: “Both the government of the Russian Federation and the Central Bank have already stated that the banking crisis in the US and Europe will not affect the Russian financial system. Since banks in the Russian Federation do not have such problems: accumulated assets in American securities or in cryptocurrencies. And at the state level, Russia has long reduced investments in US public debt to a minimum, so there will be no shocks in the domestic banking sector.”
Yusupov: “I think that this financial crisis will not affect the financial system of Russia in any way, since in the current situation our country exists in isolation from the world system. There will no longer be any impact in terms of capital outflow. At the moment, financial institutions of unfriendly countries cannot withdraw money from Russia, those who wanted to have already done it before. There may be small local problems related to settlements, but those banks that suffered as a result of this crisis were not connected with settlement activities in the Russian Federation.”
Kovalev: “For the Russian banking system, the direct impact is extremely insignificant. Now, due to sanctions, the mutual impact of the Russian and Western financial markets is minimal, hypothetical non-payments in the US or the EU will have little effect on our banks. And even more so if the problem does not go beyond the local scope of several banks. The negative, however, may also affect Russia - if it leads to a slowdown in the economies of the leading countries due to a surge in inflation, undermining the production and financial chains. In this case, demand and prices for Russian export goods may decrease. It may also be difficult to import, including parallel imports of products needed within the country. Oil prices have already fallen significantly - for several days below $70 per barrel of Brent. This was one of the reasons for the weakening of the ruble to almost 77 rubles per dollar.