A critical stage facing global banks amid the lack of solutions to ease the burdens on the economy
European and international banks are entering a critical juncture as the Russian-Ukrainian war continues for its thirteenth day, without reaching urgent solutions that ease the burdens on the global economy, which will witness a fundamental change in its financial and economic systems, with the countries of the European Union and the United States taking a package of measures that impede the work of development and reduce direct investment.
Sovereign bonds in the European Union and America were affected, according to specialists, directly after the decision to exclude seven Russian banks from the Swift correspondence system that supports global transactions within the framework of sanctions targeting Russian businessmen and investors, as the returns recorded in America declined by 1.72 percent after it touched 2.4 percent, and about 15 basis points in Germany.
Russia and Ukraine will be the most affected by this war, because they will not be able to bear the costs of imports despite direct support to Ukraine, while loans will be disrupted in the banks of neighboring countries and the European Union, and they will have high allocations and the results of the banks will be affected, which will negatively affect companies operating in all sectors.
Talaat Hafez, a banking expert, said that the result of the financial and economic sanctions imposed by America and the European Union countries on Russia and its financial and economic systems will bring about a potential fundamental change in the global financial and economic systems, explaining that when imposing sanctions on a country is being considered, work is being done.
Provided that the rest of the world’s countries, their economies and their financial systems are not affected by these sanctions, so that their effects are confined to the environment of the country on which the sanctions were imposed. Hafez added, that there is an exception in the war on some commodities and products, and this is actually what happened with some exceptions related to energy, especially those related to gas supplies, especially since Germany is among the countries that need and consume the most natural gas among the European Union countries.
He added, that countries will resort to creating their own financial systems, so that they are an alternative to the global “SWIFT” system for remittances, as Russia did during the Russian conflict over the Crimean island, and also perhaps entering into regional and international pledges and alliances, so that it acts as an alternative to the “SWIFT” system, which reduces One of the risks associated with the global isolation of the sanctioned state.
Hafez indicated that an economic bloc such as the Association of Southeast Asian Nations, known simply as ASEAN, may resort to creating financial systems similar to the “SWIFT” system to give member states financial independence in transactions.
Saudi banking system
Regarding the financial and banking situation in Saudi Arabia, Hafez affirmed that he is reassuring for several reasons, foremost of which is that Saudi Arabia, since the day of its founding, is a country of peace and security, not a confrontational country, and that is interested in establishing international peace and security, and that it enjoys diplomatic relations and global partnerships based on taking into account common interests and non-alignment.
To one party in favor of the other, being a peaceful country that does not interfere in the affairs of other countries and does not allow at the same time to interfere in their affairs, in addition to having a very strong financial and banking system, which have proven their worth and superiority in dealing with crises, whether financial or health that befall the world, and the good This is evidenced by its distinguished handling of the global financial crisis that struck the world in mid-2008 and the recent emerging crisis of the Corona virus.
In addition, Mohammed Al-Shamimary, a financial analyst, said: “The crisis directly affected global economies… We see this when looking at the sovereign bond yields in the European Union and the United States, which recorded a decline with the outbreak of the crisis, and this is an indicator of strong purchase from the fixed liquidity of governments or investment funds. On the other hand, yields are declining, including the 15 basis points drop in German bond yields, which gives negative returns because there is great demand and risk aversion, as well as US treasury bonds, after they recorded levels above 2.4 percent, and after the crisis, they fell to 1.72 percent. This is a huge decline.”
He continued, that what is being monitored now is the liquidity trend of sovereign bonds, which are considered safe havens and almost non-existent risks, for fear of current events, and this may be the beginning of something greater than that with the spread of these declines more widely throughout the global economy, especially since the recorded decline Banks, since the start of the “Russian-Ukrainian” war, have had repercussions on the economic movement.
Al-Shamimary added that it was expected that the European Central Bank would raise interest rates by 25 basis points this year, but economists agreed that the central bank would back down from raising interest rates, and this would cause a decline in shares on the European Stock Exchange, and that stopping dealing with a country the size of Russia would negatively affect He explained that the European Central Bank is expected to intervene to cover any bank defaults, and there will be large allocations to banks this year due to this crisis.
Partners are harmed
For his part, Abdullah Al-Rabadi, a financial analyst, said that there are economic impacts on Europe on the one hand and on Russia more, and in particular the European Union partners and Russia, from these steps that will be reflected in the supply operations, foremost of which is “gas, oil” and that there are pending investments. In Russia, and everyone who invests in Russia will be affected by the suspension of trade and investment movement and the disruption of remittances.
Russia will suffer in the coming period, according to El-Rabadi, its ability to supply the import bill and disrupt the ruble, which fluctuates remarkably, and there may be a significant impact on jobs, which will be the last visible results on the level of economic effects, and if the sanctions continue for 3 months, we may find a significant rise in unemployment In Russia, it will lead to a major crisis, and the European Union will be affected by these measures, including banks that have clients investing in Russia. Loans will be suspended, they will have high provisions, and the results of banks will be affected, which will be negatively affected by companies, according to Asharq Al-Awsat. link
Source: Dinar Recaps
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