Kristalina Georgieva says rapidly rising interest rates “inevitably” cause vulnerabilities in the market

The director of FMI (International Monetary Fund), Kristalina Georgieva, said risks to global financial stability have increased. She made the statement on Sunday (26.Mar.2023) during an event in Beijing, China.

According to Georgieva, the rapid increase in world interest rates to contain inflation causes “inevitably” vulnerabilities in the market, evidenced by repeated bank failures in the United States.

She highlighted that China should make an important contribution to global economic growth in 2023. The IMF expects the Chinese GDP (Gross Domestic Product) to grow by 4.4%. Beijing has set a growth target of About 5%.

“A China is expected to account for around 1/3 of global growth in 2023, giving a welcome boost to the world economy.”said the director.

In 2022, China had a GDP growth of 3%. The rate was below 5.5% stipulated in March for the government. It was also the 2nd worst result in the country since 1976. It only surpassed the rate of 2020, when the covid-19 pandemic slowed down the progress of the Chinese economy, with an increase of 2.2%.

This Monday (27.Mar), First Citizens BancShares announced that it will buy the deposits and loans of SVB (Silicon Valley Bank) and other assets held by the FDIC (Federal Deposit Insurance Corporation, US federal agency that guarantees bank deposits). Here is the full statement (321 KB, in English).

With the purchase, First Citizens [principal subsidiária do First Citizens BancShares] will take on $110 billion in assets, $56 billion in deposits and $72 billion in loans from SVB. The institution will receive an FDIC credit to ensure its liquidity.

On March 10, US authorities shut down the activities of the SVB, known for financing startups – companies that seek innovative solutions and have high growth potential.

The bankruptcy took place after the bank reported, 2 days earlier, that it had liquidated US$ 21 billion in bonds with US$ 1.8 billion in loss in the 1st quarter. In addition, it planned to sell $1.7 billion worth of shares.

The result was to stimulate a rush by customers to get their money out of the bank. But part of the withdrawn amount was invested in other, less liquid assets. With no cash to meet the demand for withdrawals, the bank collapsed.


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