Daily Management Review

IMF Head: Problems of Western banks were inevitable because of the fight against inflation


According to Kristalina Georgieva, managing director of the International Monetary Fund (IMF), the issues facing the banking sector in developed countries were an inevitable result of the government's efforts to combat inflation.

Stephen Jaffe
Stephen Jaffe
The IMF chief said in a speech at the Boao Asian Forum in China that "the rapid transition from a prolonged era of low interest rates to much higher rates, essential to combat inflation, has inevitably led to turbulence in the banking sector in a number of advanced economies."

She also added that the difficulties in the banking industry as a consequence have made the government's decision-making regarding the tools they employ even more challenging.

On March 10, California state officials shut down Silicon Valley Bank, one of the top 20 banks in the country. Since the financial disaster of 2008, it was the biggest bankruptcy in the US. Additionally, due to systemic risks, American officials shut down Silvergate, a cryptocurrency-focused bank, and Signature Bank, a significant New York bank, in March.

source: reuters.com