West Banking Crisis: Amid Sanctions against Russia?

25 Mar

Written By Dr. Ziva Rozen-Bakher

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25 March 2023 at 10:37. Is the ‘West Sanctions against Russia’ impact the West Banking Crisis? If we look at the big picture, YES, yet it hurt the vulnerable ones. To understand it, we need to look in-depth at how the sanctions against Russia impact West banking, so let’s look first at Swiss Banking. The headlines mainly refer to scandals and non-trust as the main reasons for the fall of Credit Suisse, still, the question is how the decision of the Swiss Government to abandon the traditional neutrality policy by joining the EU sanctions against Russia accelerated the fall of Credit Suisse? My indication is that it was a BIG mistake for Swiss banking because it likely led to deposit withdrawals or even to the closing of investment bank accounts by Russian citizens that still had the chance to do it amid the fear of potential sanctions. However, my assumption is that not only Russians took out their money from the Swiss banks, but also other investors from non-West countries, especially from problematic countries that have more likelihood of being hurt by potential West Sanctions, so for them, Switzerland stopped being a Safe Country for their money. Nevertheless, the decision of the Swiss government to join the sanctions against Russia not only led to deposit withdrawals or closing accounts, but it also led investors from Non-West Countries to not open new investment bank accounts in Switzerland and to look for safer countries that have no risks in them for ‘frozen money’. It can be argued, that the ‘Sanctions against Russia’ has led to a ‘Dry Wave’ in the West, namely to a shift of FDI, Trade and even investment bank accounts from West Countries to Non-West Countries, as I predicted and mentioned in depth in my analyses from my Monitoring Risks (see relevant analyses below). Under this reality, those West banks like Credit Suisse that had problems before the ‘Dry Wave’, may push to the ‘fall point’, because of the ‘money shift’ from West Countries to Non-West Countries. However, if we look at the USA banks, then the explanation gets a different colour, the colour of ‘Mercantilism’ (I deal with the negative impact of Mercantalisem in my two research papers below). To make the story short, the Biden administration has used the Mercantilism tool to protect American jobs and American industries, but Mercantilism leads to a Trade-off, namely to a non-liberalization wave that squeezes the formation of start-ups. Importantly, Cold War has a dramatic negative impact on the ‘Liberalization Wave’ that is critical for the start-up industry. The current business environment in the USA that reminds the McCarthyism, yet now also against China, is the opposite of prosperity, so no surprise that under this ‘McCarthyism wave’ alongside ‘Mercantilism’, banks are starting to fall worldwide. We should remember that Wars or even Cold Wars hinder prosperity, while peace and liberalization are the creators of wealth.