International Monetary Fund (IMF) Managing Director Kristalina Georgieva expects “more vulnerabilities” in the US banking sector amid a growing de-dollarization trend worldwide. “There has been a gradual shift away from the dollar,” the IMF chief acknowledged.
US Banking Crisis Continues
The managing director of the International Monetary Fund (IMF), Kristalina Georgieva, talked about the US banking crisis and a growing de-dollarization trend Monday at the 2023 Milken Institute Global Conference in Beverly Hills, California.
The IMF chief warned of more vulnerabilities in the US banking sector, noting that the Federal Reserve’s rapid interest rate hikes have exposed weaknesses at some banks and that the pain may not be over. She said:
It doesn’t mean that we have a free pass. It doesn’t mean that there wouldn’t be more vulnerabilities to come.
Several major banks in the US have failed in recent months, with the latest being First Republic Bank. On Monday, regulators seized the bank and sold virtually all of its assets to JPMorgan Chase. This was the largest US bank failure since the 2008 financial crisis.
Georgieva praised US regulators for their swift action in dealing with the collapse of First Republic Bank, emphasizing that she expects to see “new regulatory and disclosure thinking around how we deal with this.”
Georgieva Sees Gradual De-Dollarization Trend
The IMF managing director also talked about a growing de-dollarization trend globally. While Georgieva does not see any viable alternative among global currencies to replace the US dollar as the world’s reserve currency in the near future, she acknowledged:
There has been a gradual shift away from the dollar, it was 70% of reserves, now it is slightly under 60%.
She believes the euro is the biggest competitor to the US dollar while the British pound, the Japanese yen, and the Chinese yuan “play a very modest role.”
The BRICS nations (Brazil, Russia, India, China, and South Africa) are among the most notable advocates of de-dollarization. In addition to promoting the use of national currenciesthe economic block is working to create a new currency that will help its member countries reduce their reliance on the USD. A Russian official recently stated that he expected an agreement on a BRICS currency to be reached this year.
What do you think about the statements by IMF Managing Director Kristalina Georgieva? Let us know in the comments section below.
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