Global Financial-System Effects Are Unpredictable
Written by: Danijella Dragas, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
The direct impact of the war on the financial system seems limited. Markets have withstood the initial shock, though with some losses, to be sure. European banks may be among the most exposed, with about $75 billion of assets at risk in Russia, equivalent to about 6 to 7 percent of their preinvasion market cap. However, financial institutions globally are strongly capitalized and fundamentally prepared to absorb losses.
Beyond direct bank exposures, risks from wider ripple effects may materialize. The war is aggravating financial-system risks that first showed up in 2021, such as inflation-led recession; expanded borrowing by emerging-market countries, often denominated in dollars; a deflating bubble in China’s property sector; gridlock in the payments system; and rising risk of default in the credit held by the shadow-banking sector. All represent threats to asset prices, to which banks and other participants in the financial system are variously exposed.
The first of these risks, a recession triggered by inflation, maybe the greatest. US Treasury markets are flashing a warning: when the yield curve inverts, a recession often follows within 12 to 18 months. With recession comes credit losses. That’s bad news for banks, of course; many have started to reserve against this possibility. But the silver lining is that as rates tick higher, lending margins will likely expand, improving net interest income. Not all banks will benefit equally; those with big credit-card operations won’t see much uplift from raising rates but could gain from increased volumes.
This silver lining of good news for banks is also good news for consumers and the industry, as banks will likely have strong, well-managed balance sheets from which they can continue to lend, should times get tough. Leading banks are already thinking about how they can support retail and commercial customers for the next few years, anticipating their changing needs
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Danijella Dragas, Executive Contributor Brainz Magazine
Born and raised in Oxford, England. She earned a BS in Economics/International Trade and Banking from the prestigious University of London. Miss. Dragas was employed by Bear Stearns Investment Banking firm for over 18 years. She worked in their offices of London, San Paulo, Beijing, New York, and Irvine. Her specialty was asset management, capital markets/investment banking during her final four years at Bear Stearns, Miss. Dragas was one of the original team members that introduced Bear Stearns mortgages to the banking industry in the residential wholesale market.
She has continued her career in residential, commercial lending for 36 years. Her focus has been on construction finance, asset repositioning, fintech, and the blockchain market. In addition, numerous prestigious commercial projects on an international level. Miss. Dragas has also worked on multi-sector business finance, corporate sponsorships, hospitality, clean energy, trade programs, and pre IPO.
Her primary concentration of late has been on fintech, technology start-ups, sports arenas, and sports franchise business plans, commercial lending, focusing on construction, and working with numerous boards and CEOs in an advisory capacity.
She is extremely competent in international banking, structured finance and corporate strategy, strategic partnerships.
Miss Dragas enjoys biking, tennis, horse-riding, skiing, self-development, and golf in her spare time. An avid sports spectator and athlete, she is Managing Director of Global Soccer Pro, the United States division of Global Football Pro United Kingdom, and USA Founding Board Member, Executive Steering Committee for Football For PEACE.
Additionally, her philanthropic endeavors in the cure and treatment of Parkinson’s Disease and Football for Peace keep her very active in the global community.
