Weekly Radar (27 March, 2023)
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Two US banks went down, and two Swiss banks merged. Has the bleeding stopped?
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The global banking sector has been experiencing uncertainty and instability, apparently for different reasons, but with common symptoms: bad balance sheets lead to stock prices falling, which in turn leads to a run for deposits.
Just last week, Credit Suisse, the giant Swiss bank, was rescued by another giant Swiss bank, UBS, as it became clear that it was about to collapse. The Swiss banking sector is known for its stability, making Credit Suisse’s situation a blow to the country’s reputation. The woes of Credit Suisse are not new and have been discussed since 2021. A series of scandals and losses have led the bank to attempt several strategic turnarounds, but ultimately failed to convince investors and resulting in last week’s steep fall in share prices, which triggered a bank run from depositors, which are mostly high net worth individuals and large organisations. Deutsche Bank is another global giant that is facing similar problems.
A week prior to Credit Suisse’s downfall, two US banks known to cater to the tech sector and being friendly to the crypto industry, Silicon Valley Bank and Signature Bank, were also on the brink of collapsing, prompting the intervention of local regulators to ensure that depositors were made whole. The failure of SVB specifically had the crypto space in a weekend-long turmoil, as Circle, the company behind USDC, the second largest stablecoin, held as much as 8% of its reserves at the bank, causing the market to doubt whether it would be able to keep its promise of redeeming every USDC for 1 USD and resulting in a temporary “depeg” of the stablecoin until regulators announced that all depositors of SVB were safe, with shareholders taking the hit.
As central banks around the world, including the FED, fight inflation by raising interest rates, banks with high exposure to low-yield treasury bonds have significant unrealized losses on their balance sheets. Rating agency Moody’s has issued a negative outlook on US banks this week for this reason, and warns that many more banks in the country will face similar issues to SVB and Signature Bank this year.
So what can we expect next? Did governments take the needed measures to prevent other banks from defaulting, or are the recent collapses just the dawn of a new world financial crisis? While some analysts, like Man Group CEO Luke Ellis, believe that more regional and challenging banks in the US and the UK will fail over the next two years, others admit that the regulatory measures enforced on the banking industry are stronger than ever before and that the guarantees of liquidity provided by regulators make the financial system more resilient to collapse.
The Polkamarkets community is leaning towards the less optimistic outcome, believing that more FDIC (Federal Deposit Insurance Corporation) backed banks will default in 2023, with the YES position currently priced at 0.716 MOVR. For everyone’s sake, let’s hope that they are wrong on this one.
Donald Trump could face arrest at any moment. But does it mean he will spend any time behind bars?
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Donald Trump could face arrest this week after reportedly being asked to testify before a grand jury related to alleged hush money payments to Stormy Daniels in 2016, which he denies. If indicted, it would be the first arrest of a former US president. Trump claims he will be arrested on Tuesday, and has called for his supporters to protest against what he calls a “witch hunt.” Legal experts suggest Trump’s lawyers may try to keep his processing appointment discreet but speculate he may publicly face his arrest and use it to his advantage.
The charges would be for white-collar crimes relating to financial dealings, and given their non-violent nature, defendants typically “self-surrender” and skip public perp walks. Trump’s lawyers may even seek special arrangements to avoid him walking through the front entrance of the courthouse or police station to be more discreet. Law enforcement agencies have reportedly been working to prepare the Manhattan Criminal Court for the possibility of Trump’s indictment, with security measures likely to be heightened.
The investigation could put Trump in jeopardy of violating campaign finance laws, while some Democrats worry this may be a weak case against him, and a failed attempt to indict their rival may strengthen him. Some political commentators indeed think that an indictment could help Trump’s 2024 campaign if he can successfully paint it as a political witch hunt.
Whatever the outcome and political repercussions this case may have, an indictment is likely around the corner, as the grand jury probing alleged hush money payments has nearly completed its work. So, will this former US President spend 24 hours in jail by the end of April? The Polkamarkets community believes it is an unlikely scenario, with the NO position currently priced at 0.608 GLMR.
Under the Polkamarkets Radar
Will Sweden and Finland join NATO soon?
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Sweden and Finland are finally on track to become members of NATO, according to Tobias Billström, Sweden’s foreign minister. While the move was originally expected to be finalized last year, Turkey has opposed the two nations’ membership due to the alleged presence of militants from the Kurdistan Workers Party, ultimately prolonging the process. Now, negotiations have resumed after being suspended in January. Billström is optimistic that the Turkish Parliament will begin the ratification process soon. Once it does, it will be up to Hungary to ratify NATO membership for Finland and Sweden.
Latvian President Egils Levits believes it is in the interest of all NATO member states for Sweden and Finland to become “real family members”, instead of informal allies. Levits also commented on the ongoing conflict in Ukraine, stating that it cannot end until Russia returns to its internationally recognized borders.
Russian President Vladimir Putin, on the other hand, blames Ukraine and the West for the invasion that he ordered nearly a year ago. He also announced that Russia would suspend its participation in the New START treaty with NATO. The US Secretary General Jens Stoltenberg criticized the decision, stating that it made the world a more dangerous place, and urged Russia to reconsider. In a speech in Warsaw, U.S. President Joe Biden pledged his commitment to NATO and Article 5 of the North Atlantic Treaty.
The possibility of Sweden and Finland joining NATO is significant, given that both countries have had a policy of military non-alignment for over two centuries. Sweden’s willingness to break this policy demonstrates the seriousness of the situation.
With all this considered, we would love to see the Polkamarkets community weigh in on the possibility of these two nordic nations joining NATO in the near future, so that we could foresee the geopolitical implication of these changes in the historical alliance.
About Polkamarkets
Polkamarkets is an Autonomous Prediction Market Protocol built for multi-chain information exchange and trading where users take positions on outcomes of real-world events–in decentralized and interoperable EVMs.
