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Robust Indian Banking system amidst looming global banking crisis
May 16, 2023
In March 2023, soon after the collapse of US-based tech industry-oriented Silicon Valley Bank (SVB), Signature Bank, a leader in crypto currency deposits, met the same fate.
The failure of the Signature Bank has been largely attributed to the contagion effect of the collapse of SVB, leading to an environment of fear and distrust. At the same time as the SVB debacle, another crypto-based Silvergate Bank collapsed due to a drastic fall in customer confidence.
To curtail the crisis, the US Treasury Department and other bank regulators ensured that the depositors would not bear any losses. President Joe Biden also appealed to fellow Americans to ‘breathe easier’ and promised measures to keep the system safe and strengthen the rules of the banks.
Despite the words of confidence from the government, experts’ concerns stand unaddressed. The business models of the US banks based on a highly homogenous customer base, interest rate risk, and dependence on uninsured deposits are turning out to be the recipe for their debacle.
Experts say poor management due to inefficient leadership, weak banking regulation and lack of supervision are the root causes of the failures of these banks.
As Nobel laureate Joseph Stiglitz mentioned, only reforms like deposit insurance, improved regulatory structure, and supervision can restore confidence in the system.
Important Links:
- 4-IN-1 Professional Diploma in Banking, Financial Services & Insurance (PDBFSI): https://ask.careers/courses/4-in-1-professional-diploma-in-banking-financial-services-insurance-pdbfsi/
- Mumbai: https://ask.careers/cities/mumbai/
- TSCFM: https://ask.careers/institutes/tscfm/
