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March 15, 2023
Now is one of the worst times in banking history since the 2008 financial crisis. The Fed prefers to sacrifice local banks rather than the dollar. Now the fate of several local banks in the US is hanging in the balance, and a bank that collapses become new concern.
On Monday, the Fed held an emergency meeting to respond to the collapse of Silicon Valley Bank. The agenda for this meeting is to review and determine the discount rate or loan interest that the Fed has set for each area.
This impromptu meeting became the agenda for review, and several investors began to arrange a big class to ask the government to immediately take further action to respond to the collapse of this bank. It is hoped that this will not lead to a worse banking system.
It was recently announced that Silicon Valley Bank, one of the local US banking institutions, had collapsed. This news shocked the world, and it is also the worst since the global financial crisis in 2008, so this concern is back!
An emergency meeting held on Monday was held behind closed doors to discuss and review the rate set by the central bank. Many say that one of the main reasons these banks could collapse is more relevant to the US Dollar.
Because of these very high-interest rates, it is difficult for banks to operate as usual, and it is also tricky to stabilize financial conditions. Silicon Valley Bank became undercapitalized and sold bonds that accounted for losses of up to US$1.8 billion.
Incredibly high-interest rates set to encourage a stabilizing dollar sent US bond prices tumbling. The impact is the yield value that shot up. So this is also what makes bank deposits difficult for interest rates and makes significant losses for some banks.
Most recently, it was stated that federal bank regulators would carry out an emergency measure to back Silicon Valley Bank deposits in full. US Decision to guarantee deposits beyond the federally insured ceiling and the treasure also said they guarantee bank assets.
It was stated that the Fed would save the assets of Silicon Valley Bank customers. The Federal Reserve and the US government were entirely surprised by the collapse of Silicon Valley Bank, so the primary step that will be taken is to save customer funds.
Even so, US authorities have yet to be able to return assets to debt holders without collateral. The losses incurred required additional funds, which needed to be increased even though the Federal Reserve Board had provided additional funds to restore the assets.
Apart from the US Local Banks at stake in this economic condition, the condition of world currencies is now under more scrutiny. It is predicted that the exchange rate of the Rupiah and almost all major world currencies will face difficulties in dealing with the US Dollar.
Powell reiterated that they would not hesitate to raise the benchmark interest rate even more. This is done for the sake of the value of the US Dollar and suppressing inflation, although this is at the expense of local banks.
The Fed explained that this happened because inflation was far above the target. Head of Bank Indonesia's Monetary Management Department, Edi Susianto, said that this has happened and its impact is difficult to avoid.
The official from Bank Indonesia continues to express the result of the weakening of the central Asian and regional currencies, including Indonesia.
The US Central Bank undergoes a very vital market intervention. This even caused one of the local US banks to go bankrupt, namely Silicon Valley Bank. Market expectations are now also concerned, mainly because Fed Powell threatens the value of world currencies.
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