Finance Markets and Risk Essay example
Masters
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Finance & Accounting
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What is meant by ‘systemic risk’ and ‘systemically important financial institutions’ (SIFIs)? Is separation of banking between retail / commercial banking business and investment banking need of the hour?- An Analysis ( Word Count with Heading and references 2555) What is meant by ‘systemic risk’ and ‘systemically important financial institutions’ (SIFIs)?…

Introduction

The related pressure later extends to the liquidity of funding of financial institutions around the world that are assisting those independent markets. Illiquidity in markets sequentially can result in potentially momentous real economic impacts, thus warrant policy action, particularly by central banks. (Evanoff et al 2009: 7). As per IMF (International Monetary Fund), BIS (Bank for International Settlements) and FSB (Financial Standard Board), systemic financial risk is one, which is associated with the peril of risk of disruption to financial services that (a) is happened by a destruction of whole or parts of the financial system and has the probable to have the worst negative outcome for real economy. During September 2008, AIG borrowed from the Federal Reserve System an $85 billion two-year loan that too at a penalty rate, which has been termed as ever known the rescue of one of the globe’s major insurers. In return for the rescue operation, Fed received a 79.9% of shares in the AIG. At the time, the investment banking arm of AIG witnessed a systemic risk emanating from its credit default swap (CDS) business. (Neave 2010: 397). The failure of one firm may not impact its rivals as is happening in the most sectors of the economy nor does it result in market failures. ...
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