Is the global financial system healthy?

May 8, 2023

In March 2023, the brutal demise of the Silicon Valley Bank (SVB) was the first to happen as a result of the hiking of interest rates that central banks started implementing from late 2021 onwards. Although the Federal Deposit Insurance Corporation (FDIC), a US government corporation providing insurance for bank deposits, was swift, thus contributing to reassure depositors and markets, the default of the 16th largest lender in the US following a bank run was hardly perceived as a good omen. SVB’s default came all the more as a shock as the bank was deeply connected to the heart of the technology, innovation-driven US capitalism, which accounted for the bulk of the bank’s clients and contributed to the booming growth it had experienced in the few years that preceded its failure.

Nevertheless, fears surrounding the financial sector’s health were not entirely tamed. US midsize banks were particularly scrutinized following a wave of withdrawals of deposits from customers, leading to the re-evaluation of their shares by investors. The fate of Crédit Suisse, a Zurich-based historic lender whose history goes back to the mid-19th century, and which was saved from bankruptcy by a massive, “shotgun” intervention of Swiss federal authorities, further fueled worries that the financial sector could be seriously harmed by the end of the “era of cheap money”. Many observers consider that the latter had fueled an “everything bubble” which could lead to potential serious consequences on an already strained global economy.

The response of policymakers – amongst them finance ministers and central bankers - in both advanced and emerging economies, their ability to act fast and in coordination with each other, and the possibility for them to balance two apparently contradicting goals – lowering inflation levels which have in recent months reached decades-high levels while maintaining a healthy financial system – are thus subject to question. In particular, the efficiency of instruments inherited from the 2008 financial crisis and the lessons drawn from the latter should also be meditated.

In a new webinar, the Policy Center for the New South offers to reflect on the stability of the global financial system in times of increased geopolitical stress and fragmentation. What happened to the SVB and Crédit Suisse? Can these two cases be considered as isolated and mostly resulting from peculiar, irresponsible management? How healthy are the global banking and financial systems? To what extent does geopolitics further stress them? How can policymakers contribute to their stability and what tools should be mobilized for that purpose?

Hinh T. Dinh
Senior Fellow
Hinh T. Dinh is a Senior Fellow at the Policy Center for the New South, Morocco and President of Economic Growth and Transformation, LLC., VA, USA. Previously, he spent over 35 years working at the World Bank Group where his last position was Lead Economist in the Office of the Senior Vice President and Chief Economist. He has authored and co-authored books published by the World Bank, Oxford University, and the Policy Center for the New South, and has written articles in professional journals covering public finance, international finance, and industrialization. His latest books include Tales from the Development Frontier (2013), Light Manufacturing in Vietnam (2013), Jobs, Industrialization, and Globalization (2017), Morocco (2020), and COVID-19 and Developing Countries (202 ...
Helyette Geman
Senior Fellow
Helyette Geman is Senior Fellow at the Policy Center for the New South, Director of the Commodity Finance Center at Birkbeck, University of London, and a Research Professor at the Johns Hopkins University, who focuses on Probability, Commodities and Finance. She was Chairman of the Finance Department at ESSEC Business School from 1988 to 1995, and the Director of Dauphine Master 203 at the University of Paris Dauphine from 1995 to 2005. Helyette Geman is a Graduate from Ecole Normale Supérieure in Mathematics and holds a PhD in Probability and a PhD in Finance. She worked as a scientific expert for EDF Trading, Louis Dreyfus, BMP Billiton, Bunge Invivo and financial institutions. Her book “Commodities and Commodity Derivatives” published in 2005 by Wiley Finance has become th ...
Fatima Hewaidi
Atlantic Dialogues Emerging Leaders Programme Alumna
Fatima Hewaidi currently leads the Market Intelligence office for the Middle East at Barclays Private Bank in Switzerland. For the past four years, she was a Business Engagement Lead at the World Economic Forum, where she developed partnerships and curated dialogues among business leaders in the Middle East and North Africa. Prior to this, she measured and analyzed the ease of starting a business across the Middle East and Africa as a Consultant in the World Bank's Doing Business project. Fatima holds an MA in International Economics from the Johns Hopkins University - School of Advanced International Studies (SAIS), and a BA in International Relations from the University of British Columbia. She also studied at Sciences Po Paris - Menton Campus for Middle East and Mediterran ...


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