Economists underestimated the repercussions of the bankruptcy of some banks on the US economy itself and the global economy in general, pointing out that the strong intervention by the US stakeholders to absorb the repercussions that may bring to mind the mortgage crisis in the US, and the world in 2008, is relatively reassuring the markets.
Two experts attributed the drop in European stocks by more than 3 percent since the outbreak of the Russian-Ukrainian war to several other factors, such as the crisis of the American march, the decline in oil prices in global markets, in addition to the crisis of the troubled the bank Credit Suisse, which has been suffering from multiple problems for a while, most notably lack of confidence and bad results.
In this context, the professor of economics at Qatar University Dr. Rajab Al-Esmail, described in a statement to Qatar News Agency (QNA) the bankruptcy of some US banks in the recent period as individual and expected, given that Silicon Valley Bank deals with startups and companies operating in technology sector.
He said, “It is natural that the bonds of these banks are high-risk, given their association with risky companies. Everyone knows that these emerging companies operate in the technology sector, and therefore the risk rates will be high.” He pointed out that the aforementioned state of bankruptcy will not have a significant impact on the US or global economy, and that it will be limited, especially since the bankruptcy bank in the United States is the sixteenth, and if compared to the size of the US domestic product, it is negligible.
He said: “The reassurance measures taken by the United States of America by mobilizing a federal guarantee worth USD 175 billion kept in the vaults of Silicon Valley for the accounts of emerging institutions and investors contributed to calming the markets, considering at the same time that the measure taken by the British government to acquire a British bank on the bank’s branch in Britain had a role in stabilizing the markets.
US regulators took emergency measures early in the crisis, following the collapse of the Silicon Valley bank, including guaranteeing uninsured deposits with the bank.
Potential buyers are often hesitant when troubled companies try to sell assets, partly because any pre-bankruptcy deal can be canceled if the companies later seek Chapter 11 bankruptcy protection within a certain time frame.
The concerned authorities have not yet made a final decision on the path they will take, and they are still trying to find investors to buy the group’s assets, without submitting a request for bankruptcy, which is also an option.
The professor of economics at Qatar University ruled out that the region’s banks would be exposed to the accounts of the American banks that declared bankruptcy.
Dr. Al-Esmail indicated that the crisis of the American march will have a greater impact on the global economy than the aforementioned individual bankruptcies.
He pointed out that bankruptcies were a wake-up call for central banks to tighten control over the lending policies of emerging enterprises working in the field of technology, given the high degree of risk and bankruptcy in their economic life cycle.
For his part, the financial analyst Tamer Hassan, said in a statement to Qatar News Agency (QNA) that although the crisis appears as a snowball that is getting bigger with every day, it is not in the form that happened in 2008, despite his acknowledgment that there are greater concerns for the European and Asian banking sector.
He said, “I think that the Silicon Valley crisis and the losses of American banks are book or paper losses that will end after an expected stabilization of matters with the containment of the crisis.” He added that the impact will be greater on the European banking sector due to the exposure of most of its banks to the US market, and also because most European banks do not have a legislative structure like America.
He pointed out that the impact of the crisis on the Arab region will be limited and insignificant, because there is no bank in the region that has a direct relationship with Silicon Valley Bank.