The collapse of SVB Bank was the spark that ignited panic among investors and depositors, with the result that the crisis reached almost five banks. But what if this is just the beginning?
The exit of investors from the stocks of the financial sector indicates a kind of concern, as the stocks of this sector worldwide have lost about a trillion dollars of their market value since the beginning of this month until last Friday.
For his part, Ryan Lemand, co-founder and CEO of New Vision Wealth Management, believes that the US market is in a worse situation than it is in the European markets, due to stricter regulations and laws in Europe.
He said in an exclusive interview with Sky News Arabia Economy, “The 2008 crisis began in Europe, specifically with the British Bank Northern Rock, and then extended to America with the collapse of Lehman Brothers. Today, the crisis in Credit Suisse is greater than what is witnessed in American banks.”
“What is happening is a beginning…and there may be cracks…the crisis will extend, but we rule out that it will be as bad as the global financial crisis in 2008. We expect that there will be economic, financial and banking weakness in America at all levels, but we rule out collapses,” he said. Ryan Lemond, Co-Founder and CEO of New Vision Wealth Management.
Regarding the Fed’s move to raise interest rates at an accelerated pace and its impact on banks and bonds, Ryan said that Jerome Powell was very frank in his testimony before Congress, as he said that the Fed needs a slowdown in the economy to control the scourge of inflation.
According to Ryan, among the victims of the US economic slowdown:
- Banks that are poorly managed and do not have proper risk management doing their job
- Zombie companies… They are heavily indebted companies, whose income is not sufficient to cover all their expenses, as they are barely able to meet their debt service without being able to pay the debt itself. These companies generally depend on the credit granted by banks to ensure their survival, which puts them in a state of Continuous dependence on the liquidity provided by creditors, whether they are private banks or public institutions.
Ryan explained that about 25 percent of the S&P 500 companies are zombie companies.
He said that the responsibility of central banks lies in maintaining price stability and financial stability, but that central banks failed to achieve both.
He stressed the need for central banks to continue raising interest rates to curb inflation. Pointing out that the US facilities provided to banks after the SVB crisis erased about 50 percent of the monetary tightening carried out by the Federal Reserve in its war against inflation.
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