Economy

G7 countries are going to develop a joint approach to fight banking crises

Published

4 weeks ago

May 8, 2023

G7 countries are going to develop plans to combat banking crises like the one that led to the collapse of U.S. Silicon Valley Bank (SVB), the Japanese newspaper Nikkei Asia reports. Recall there was also a panic in the stock market at that time. The USDC momentarily lost its peg to the dollar.

“A group of seven leading industrialized nations intends to develop plans to deal with a banking crisis similar to the one that led to the collapse of Silicon Valley Bank,” the paper said.

As noted by the newspaper, the finance ministers and central bank governors of the G7 countries plan to set out these plans in a joint statement at the end of a three-day meeting that ends Saturday in Niigata, Japan. According to the publication, the finance ministers will stress the importance of analyzing the causes of the failures of SVB and First Republic Bank.

“The G7 plans to call on the Financial Stability Board to explore concrete measures,” the publication adds. The goal of the G7 is to curb the spread of financial instability.

It is noted that the countries have concluded that tougher responses to “banking panic” are needed, especially in a situation where rumors can spread on social media and depositors can withdraw funds instantly through online banking.

In March, California state regulators closed Silicon Valley Bank, one of the top 20 commercial banks in the United States. The collapse of SVB was associated with the growth of the key rate of the Federal Reserve, which led to a depreciation of assets on the balance sheets of many financial institutions. Also on March 8 it was announced the closure of a crypto-oriented bank Silvergate, and on March 12 – a similar New York-based Signature Bank.

Earlier, we reported that the cost of default insurance in the U.S. reached a record level.

Economy

Fed Chair Powell to testify at US Senate June 22

Published

7 hours ago

June 4, 2023

Federal Reserve Chair Jerome Powell will testify at the U.S. Senate Banking Committee on June 22 at 10 am Eastern time, panel chief Sherrod Brown said on Friday.

The testimony marks the second iteration of the Fed chair’s twice-yearly reports to Congress on the state of U.S. monetary policy, and will come a week after the Fed’s upcoming interest-rate-setting meeting at which it is expected to leave borrowing costs unchanged despite still-high inflation.

Economy

S&P spares France from rating downgrade

Published

9 hours ago

June 4, 2023

Ratings agency S&P spared France on Friday the embarrassment of downgrading the country’s sovereign debt, but remained cautious about the outlook on account of the strained public accounts.

S&P left the country’s AA rating untouched after a regular review and said that the outlook remained negative due to “downside risks to our forecast for France’s public finances amid its already elevated general government debt”.

A downgrade would have been the second in six weeks after rival agency Fitch cut its rating at the end of April to AA- over concerns about potential political paralysis and social unrest.

Finance Minister Bruno Le Maire told weekend newspaper Le Journal du Dimanche that S&P’s decision to keep its AA rating was a “positive signal” and that the government’s public finance strategy was credible.

President Emmanuel Macron’s government is under pressure to prove that the government can stick to its deficit and debt reduction plans in the face of stubbornly high public spending and a rising cost of interest payments.

Economy

ECB’s Visco says falling energy prices should help tame inflation

Published

11 hours ago

June 4, 2023

The rapid decline in energy costs should help to tame inflation in Europe, Bank of Italy governor Ignazio Visco said on Saturday, urging companies not to seek to boost their margins by leaving prices higher for longer.

Visco, a member of the European Central Bank’s governing council, said the key issue was what happened to inflation now that energy prices had retreated from peaks hit after last year’s Russian invasion of Ukraine.

“I expect that at this point there will also be a cooling in the increase in core inflation, as we call it, which should reflect this reduction in the cost of energy,” Visco told the International Economy Festival in Turin.
“If this happens, (ECB) monetary policy is certainly the correct one at the moment even if I would perhaps have pressed for a more gradual approach,” he added.

Euro zone inflation eased more than expected in May fuelling a debate about the need for further ECB rate hikes beyond an increase expected later this month.

Inflation in the 20 nations sharing the euro eased to 6.1% in May from 7.0% in April, below expectations for 6.3% in a Reuters poll of economists.

Core inflation, which excludes volatile food and fuel prices and which has played an increasing role in the ECB’s policy deliberations, fell to 5.3%.

Visco warned against a wage-price spiral, saying salary rises should come against a backdrop of a growing economy rather than chasing inflation.

He also said companies had a role to play in ensuring that inflation was brought under control so that the ECB did not keep having to push up the cost of borrowing.

“It is not in the interest of companies themselves … to fail to reflect the lower cost of energy in their prices because then the cost of financing would rise,” he added.