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Jordanian economists weigh in on US banking sector crisis

By Maria Weldali - Mar 16,2023 - Last updated at Mar 16,2023

A security guard at Silicon Valley Bank monitors a line of people outside the office on March 13, 2023 in Santa Clara, California (AFP photo)

AMMAN — The recent US banking crisis has garnered the immediate attention of Jordanian economists and bankers.

Economist Mazen Marji told The Jordan Times that the recent crises of the US-based Silicon Valley Bank (SVB) and Signature Bank, are part and parcel of the US banking sector. Currently, there might not be a direct impact on Jordan, but this major crisis could have a domino effect on the global economy and could potentially spread to larger banks, he said.

“Every time the US has gone into recession in history, we have had a downturn as well.” Marji highlighted. 

“We are talking about the largest economy in the world. The US is a leading global trader and we cannot turn a blind eye to this fact,” he added.

When banks of major economies are in serious crises, part of the proper response is reassuring the public, according to Marji. However, any crisis or collapse cannot be underestimated just to improve the image of any potential negative consequences, he added.

Silicon Valley Bank — which specialised in lending to tech companies and startups — was shut down by US regulators who seized the bank’s assets on Friday in what is being described as the largest bank collapse since the 2008 financial crisis. Two days later, New York-based Signature Bank, which is involved in crypto, was next to face turmoil. 

Just days after the downfall of the two US banks, the shares of major European bank, Credit Suisse, plunged more than 30 per cent on Wednesday. 

Speaking about the possible implications on financial markets and the global economy, economist Husam Ayesh indicated that the consequent collapses have sent shock waves and set off panic worldwide. 

According to Ayesh, “It would be difficult to say that the collapse of the two US-based banks would affect Jordan’s economy. But the repercussions of the collapse without doubt affect the global economy.” 

The nature of the performances and activities of these banks differ from the performance of the Jordanian banking system, he highlighted.

Director-General of the Association of Banks in Jordan, Maher Mahrouq, told The Jordan Times that the collapse of SVB and the plunge in Credit Suisse shares have “no direct implications” on the Jordanian banking sector.

“In Jordan, banks operate under sound banking principles. And the liquidity of the Kingdom’s banking system is high and has a strong capital base to retain more risk and, as a result, the Jordanian banking sector is amongst the most stable and safe in the world,” Mahrouq said.

Further, Mahrouq said that there has always been “prudent supervision” on the part of the Central Bank of Jordan, adding that Jordanian banks do not have any business dealings with the aforementioned banks.

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