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The transformation in the banking system in the lead-up of the Global Financial Crisis - Essay Example
Finance & Accounting
Pages 13 (3263 words)
The study gives particular attention to the changes in the banking system that occurred in New Zealand. This research tries to find an answer to the question “to what extent has the Global Financial Crisis caused these changes to be unwound?” with a special focus on New Zealand…
The paper tells that the Global Financial Crisis started with the collapse of biggest (in terms of financial status and business of these companies) financial companies of the world, including Merrill Lynch and Lehman Brothers. The crisis situation became worst in 2007 when financial intermediaries like banks of USA were in a position to announce themselves as bankrupts. In this time the US government intervened into the matter and provided the necessary financial support to these banks and financial intermediaries and slightly controlled the crisis situation. The financial crisis situation occurred because of the strategy of those financial intermediaries to provide various types of loans, such as house loans, car loans etc., to individuals and business organizations. The crisis situation became worst when these loans or hedge funds have been circulated to different layers in the banking transactions all around the world. Increase in the layers of providing loans to different sections of the world economy has caused these financial intermediaries to suffer from greater risks of default of loans. The risk has been at high because default of one of the person or organization could have resulted in the default of the entire system of circulation of loans. In the mid-2007 this has actually happened and the entire financial system of the country collapsed. This crisis situation eventually transferred into several other countries of the world, including developed countries like United Kingdom, Australia, New Zealand, Japan, and developing countries like India and China ...