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BREAKING NEWS
Cristian Espinosa was appointed Ambassador of Ecuador to the United States
Daniel Noboa receives the credentials of the new United States ambassador
40,000 women will receive scholarships in higher education
Julian Assange released from prison, after agreement with the United States
Armed Forces: Criminal gangs have lost USD 1.2 billion due to military operations in Ecuador
Minister of Defense: “It is not fair that some risk their lives, while others play with justice”
How can green banana flour enhance baked goods?
“I’m crazy for wanting to serve my country,” says Daniel Noboa at the presentation of “La Cárcel del Encuentro” in Santa Elena
Construction of the Encuentro maximum-security prison in Santa Elena begins
National blackout in Ecuador due to transmission line failure, confirms the Government

Bankruptcy of US banks: will it have effects for Ecuador?

Posted On 14 Mar 2023

The fall of Silicon Valley Bank and Signature Bank has changed the landscape and could cause the Federal Reserve (Fed) to stop its decision to continue raising interest rates (a quarter point or half a point). If before the increase depended only on the evolution of the US inflation and employment data, economic experts believe that financial instability could motivate further analysis by the regulatory body. An increase, it is warned, could prevent the ‘waters from calming down’, promote the strengthening of the dollar and thus generate an effect on economies that depend on this currency, including Ecuador.

Experts believe that the FED will stop the rise in interest rates.

This is how Fausto Ortiz, former Minister of Economy, explains it, who believes that if there is an impact for the country, it could come through the currency. “We, who have the North American currency, are interested in knowing if (with this) the dollar is going to strengthen or weaken.” An appreciation, he explains, would make the products that Ecuador exports more expensive.

However, analysts do not believe that this impact will occur or that there are greater consequences. They clarify that this financial instability does not compare at all with the financial crisis of 2008, which was caused by a fraud in the sale of the mortgage portfolio.

For the economic analyst Santiago Mosquera, the run on these two banks “is quite localized and will not necessarily permeate the American financial system as a whole. This problem is the typical case of a bank run in which the bank’s assets lose quality and/or liquidity for specific reasons”.

The Federal Reserve, the Treasury Department and the regulatory body agreed on Sunday to guarantee the deposits of all clients of the Californian Silicon Valley Bank (SVB) and the New York Signature Bank, after the bankruptcy of both, as well as offer the rest of the sector a line of loans that avoid new tensions.

In the context of rising interest rates and fears of a recession, Silicon Valley Bank came to suffer large withdrawals of funds, for which it was forced to look for cash. In an attempt to strengthen itself, the firm announced the sale of a portfolio of US Treasury bonds worth 21,000 million dollars. The operation entailed losses of 1,800 million dollars. The scenario caused the fall of shares.

https://www.expreso.ec/actualidad/economia/quiebra-bancos-ee-uu-tendra-efectos-ecuador-153718.html

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