Experts and specialists who spoke to the program "Scenarios" are likely to affect the Arab region by the current banking crisis that has spread from America to Europe, especially countries that suffer from a shortage of dollars and economic problems.
Assistant Professor of Economics at Qatar University Jalal Qannas said that many Arab and Gulf sovereign funds are located in the United States of America and Europe, in search of profits and diversification of the economy, but they are located in places where there is risk that may have repercussions, pointing out that after the sudden collapse of the banks "Silicon Valley" and "Credit Suisse", stocks fell in all Gulf countries as well as the stock exchange.
In order to avoid the repercussions of the banking crisis on Arab countries, a sniper saw – in his speech to the episode (2023/3/23) of the program "Scenarios" – the need to shift to real investments and not to stay in commercial investments and short profitability.
For his part, Mustafa Shaheen, a professor of economics at the American College of Oakland, predicted that some Arab countries will be affected by the banking crisis in the United States and Europe, especially Egypt, Sudan, Tunisia and Lebanon, where these countries will suffer from high dollar and gold prices, and high prices in general in exchange for the devaluation of the national currency.
As for the Gulf countries, he described them as one of the best economies in the world in terms of financial strength and indicators; such as Qatar, Kuwait, Saudi Arabia and others, there are very large financial reserves in dollars that can save any bank in crisis.
The professor of economics at the American College of Oakland said that central banks in the Gulf are very strong, and have very large reserves of foreign exchange, but the problem in the Arab world is the need to get out of the framework of the traditional banking interest pattern of Islamic systems, such as the Musharaka and Murabaha systems, and this in turn requires the provision of other criteria.
Causes and repercussions of the banking crisis
On the other hand, the assistant professor of economics at Qatar University attributed the current banking crisis - specifically the sudden bankruptcy of Silicon Valley Bank - to financial supervision and interest rate hikes, and said that this banking crisis will continue as long as the causes continue.
He stressed that the reasons for the crisis in Silicon Valley - a bank specialized in providing loans and facilities to startups, especially in the technology sector - are due to the fact that the bank was not under strict financial control, indicating that the US Central Bank raised interest rates to fight inflation, and this affected the work of banks.
As long as central banks continue to target inflation, which has its causes without focusing on financial stability, the problem of banks will continue.
What happened in Silicon Valley is that the US Federal Reserve has raised interest rates about 8 times since March 2022 to rein in inflation, and the bank is forced to pay more to depositors in exchange for low returns on its investments. As soon as the crisis loomed, depositors rushed to withdraw their deposits in one day from the bank.
The professor of economics at the American College of Oakland, saw that the banking crisis is an extension of the financial crisis of 2008, and studied financial management within the United States, stressing that what happened in the bank "Silicon Valley" is due to the policy followed by former President Donald Trump, where he provided facilities to banks outside the regulatory framework, but the US Congress began to impose severe measures today on banks.
He predicted that the banking crisis would have effects on the global economy, especially if interest rates rise.
Stefan Gerlach, chief economist at EFG Bank, told Scenarios that the banking crisis is being raised by central banks, and believes that the concern is that things are looking good, and suddenly bankrupt institutions or banks appear.
He said that the Swiss authorities and the Swiss National Bank have managed to control the banking crisis at the moment and the situation is stable, and it remains to be seen how things develop. He predicted that the next two months would be anxious.
ECB President Christine Lagarde said recent tensions surrounding the banking sector posed "new risks" to the European economy.