ALEXEY VEDEV CONSIDERS MOODY'S FORECAST FOR THE U.S. BANKING SYSTEM PREMATURE

– Alexey Leonidovich, what happens with banks in the USA?

– This was quite an expected problem. For several years, the U.S. has had a quantitative easing program (the Central Bank buys securities at the open market to increase the money supply), a stimulative financial policy involving very low interest rates and lots of money. When moving backwards, which is what happened as a result of the run-up in inflation, discount rates began to rise. The key issue of risk management emerged. Where it's thin, it's torn, and that's what happened. The move to a tighter monetary policy caused risk, assets problems, it was virtually inevitable. As for Silicon Valley Bank, where it all started, there is a second problem. Usually the startups (which SVB was involved in) are funded with equity, not debt capital. Usually it's "business angels" who invest money, who are part of the startups' equity rather than lending. Thus, here, too, there were the expected complications.

– What are the threats that these problems imply for the post-Soviet countries?

– I will start with Russia, where there are fewer threats due to the current sanctions. However, basically, there are counterparty risks, which increases the burden on all post-Soviet countries, because these risks need to be analyzed.

 – Would a "bank bust" in the U.S. affect the dollar exchange rate?

 – No doubt, everything depends on the scale of problems, but I think that so far it will not have a visible effect. Although the situation is alarming, the crisis is not that large-scale.

 – If we imagine that everything went according to the worst scenario, what could happen? A repeat of the 2008 global crisis?

– The U.S. authorities have the experience of the 2007-2008 crisis. Thus, I think we can expect decisive action from the regulators, including in other countries, not only in the U.S. There may be a need for financial injections and other ways, for example, bank vacations, temporary freezing of deposits in certain banks. After all, customers have become more active now due to the development of digital technology, and banking panic today is a far cry from the bank turmoil of 15 years ago. Now money can be withdrawn instantly.

 – Is it possible to say that the U.S. Federal Reserve System (FRS) will just turn on the printing press and flood the market with money?

 – No, I don't think that this will be the first step, although inflation in the U.S. is at 6%. True, it is not that high, but still, it is a serious indicator for the States, therefore, I think there will be a combination of regulatory and financial impacts. I don't think the market will be flooded with money.

– A separate issue is cryptocurrencies. How will they react to the banking situation in the U.S., could there be a crisis in this area? It is already known that USD Coin plummeted in value as the management company stored almost $3.5 bn in the bankrupt Silicon Valley Bank. Investors ended up cashing out more than $2 bn in USD Coin.

 – I do not think so. But there may be some instability if there is a connection (cryptocurrencies with bankrupt banks). However, I do not foresee a big crisis.

 – Meanwhile, the international rating agency Moody's lowered the outlook on the U.S. banking system to negative.

 – There are three leading rating agencies: Standard & Poor's (S&P Global Ratings), Fitch Ratings and Moody's. At this point we should remember the experience of 2008, when they assigned “AAA” investment grade ratings to mortgage-backed securities and then collapsed in panick all their ratings. I think Moody's is running ahead of the curve now by issuing such negative ratings. Apparently, they are recalling past experiences. I would not be in such a hurry to downgrade U.S. bank ratings.

– Will the current events have an impact on the price of oil?

 – Slightly. This, as I said, is not a large-scale problem yet. The oil price situation will be quite stable.