The banking crisis threatens to cause ‘zero growth’ in Latin America in 2023

The Inter-American Development Bank, author of the forecast, contemplates that, even without the current situation, the region will grow less than 1%.

• banking crisis SVB, Signature, First Republic… The black (and bottomless) hole of midsize banking in the United States
• absorption Switzerland delivers Credit Suisse to UBS at a bargain price to avoid its collapse in the midst of the banking crisis

The global financial crisis threatens to create a ‘balance sheet recession’ (balance sheet recession), that is, a credit crunch that would sink growth. The first international organization to assess this cost in the ‘real economy’ of the banking crisis is the Inter-American Development Bank (IDB), which is holding its annual meeting in Panama.

According to the chief economist of that agency, Eric Parradoif a ‘financial shock’ occurs, Latin America and the Caribbean run the risk of registering a zero growth in 2023. The IDB’s analysis starts from a pessimistic basis for the region, since the entity foresees that, even if the crisis stops, growth will barely reach 1% this year, a very low figure that indicates the persistence of structural problems in Latin America.

Meanwhile, markets reopen today with an eye toward potential risk from banks that have relationships with Credit Suisse, which this Sunday was bought – with a massive intervention of the State – by its Swiss rival usbs. The second element of concern continues to be the medium-sized banks of USA. Washington managed last night (early today in Spain) to find a buyer for one of the banks that has intervened since the beginning of the crisis.

He SignatureBank, based on NY, be acquired by the New York Community Bank, and its 40 branches will be under the brand flagstar, one of those employed by that entity. New York Community Bank will pay 2,700 million dollars (2,500 million euros) for Signature, with which it will take control, in addition to all the branches of that bank, of 38,400 million dollars (36,000 million euros in assets).

That’s just a small part of Signature’s assets. Around 60,000 million dollars more will remain in the hands of the State, that he hopes to sell them, presumably at a good price, in the future. Signature was the second bank to collapse in this crisis, after the Californian Silicon Valley Bank (SVB), which is twice as big and for which Washington has yet to find a buyer.

Signature’s collapse was primarily due to its cryptocurrency investments -whose value plummeted in 2022- and to the massive withdrawal of deposits from the entity after the intervention of SVB. Signature had a lot of deposits that exceed 250,000 dollars (234,000 euros) that the State guarantees in the US.