By Nirmal P. Acharya
News of bank failures began with Silicon Valley Bank, once a prominent player in the banking industry, collapsed after struggling to cope with rising yields that eroded the value of its assets. Signature Bank was also shut down by regulators as its depositors panicked. This contagion spread to Europe and Credit Suisse collapsed, many compared the current upheaval to the 2008 financial crisis.
Whenever I had some spare money, I used to deposit it in the Everest Bank in town, never realizing that the banks could go bankrupt anytime. Now, all of a sudden I feel the money stored in the banks is not safe and could disappear into thin air just like that as my research shows that bank failures happen more often than one might think. When Signature and Silicon Valley Bank collapsed, they were both highly rated by credit rating agencies.
Americans invented many things and became an advanced civilization. From powerful ships to guns, but even more powerful are the financial inventions, especially financial derivatives. I guess many in Nepal do not understand the US financial system, however, we are learning that the US can harvest the world by running this financial system. Even if American banks fail, other countries may have to pick up the bill. As it has been reported, the depositors of failed Silicon Valley Bank were mostly wealthy Chinese.
The financial system of the US has been developed to the extent that it is ubiquitous so that the concept of finance accompanies everything the US does. The MCC, for example, also has financial implications. Under the terms of the MCC, Nepal is required to inject matching funds into the MCC, which is substantial. Once Nepal’s matching funds are injected into the MCC, 100 per cent will be allocated to the US side. On the contrary, has the money the US promised to inject into the MCC arrived or not? God only knows the answer to this question, because the MCC is not governed by the Nepalese government, neither audited by the Nepalese government nor subject to Nepalese law!
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