Asharq Al-awsat English Middle-east and International News and Opinion from Asharq Al-awsat Newspaper

Fears of SVB’s Collapse Having Repercussions on Arab Countries

Fears of SVB’s Collapse Having Repercussions on Arab Countries

Tuesday, 14 March, 2023 - 10:45
Anticipation for disclosures of the investment sectors and financial activities in the Arab countries due to the resounding bankruptcy of the Silicon Valley Bank (Reuters)

The collapse of the California-based Silicon Valley Bank (SVB) has fueled fears among customers, depositors, and technology companies regarding the economic level in the US. They also worry about the announced bankruptcy having a contagion effect in wider regions of the world.

The Arab region does not seem immune to the repercussions, as banks in Kuwait disclosed minor exposures to SVB's bankruptcy.

Arab world banks and investment institutions have expressed caution towards SVB’s economic failure.

The fallout of SVB's insolvency will widen, specialists told Asharq Al-Awsat, adding that its impact will reach the business environment and the banking sector worldwide.

Experts noted that the business and financial environments in the Arab and Gulf regions would each be affected differently.

“SVB’s collapse highlights potential risks to the financial sector and potential implications for global financial stability,” said Fadel bin Saad al-Buainain, Saudi Shura Council member.

“Whatever has been said about controlling the bank’s crisis and limiting its repercussions on the banking system, that saying lacks relevance for two reasons,” he added.

The two reasons cited by al-Buainain include the overlapping of the components of financial sectors, which aggravates exposure to risks, and panic driving depositors to withdraw their money out of fear of being written off due to the bankruptcy of banks.

“I think that the panic that afflicted depositors may have an impact that exceeds the impact of the collapse of the bank,” revealed al-Buainain.

“We find that panic hit financial markets and made investors more cautious,” he added, noting that “this may dry up the market and increase repercussions.”

Al-Buainain clarified that raising interest rates had made investors less willing to invest and take risks and that the tightening of monetary policy may be one of the causes of what happened recently.

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