The recent financial crisis has led governments around the world to update their existed regulatory framework in order to minimize – as possible – the duration of the crisis; however, until today, the expansion of the financial crisis seems to be continued; no legislative…
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the structure and the principles of the financial markets have been proved to have a critical role in the increase of the pressure against the economies internationally; however, there are countries, like Dubai, which managed to keep their economy strong;
The effects of financial crisis can be divided into two different categories: a) the effects referring to the national economy and b) the effects related to the firms and individuals that have interests on specific investments. Failures in the regulation of crisis in regard to the economy and the private sector have been identified; these failures have led to the instability of the markets or firms involved1; at the next level, the financial crisis have led to the differentiation of the role of risk – as a decisive factor in the development of financial policies. In this context, it can be noted that the financial crisis has led to the differentiation of the political decisions in regard to the rules that govern the markets worldwide. On the other hand, Claessens et al. (2010) supported that current crisis has many similarities with the financial crises of the past2; under these terms, the countries that have faced similar crises in the past should be more ready to face the current recession; however, in the case of USA the above ‘rule’ has not been verified. Moreover, the view of Claessens et al. (2010) can lead to the assumption that countries with no previous experiences of financial crisis are likely to fail in handling the recent recession; Dubai had not face such a crisis in the past; the crisis hit the country recently, i.e. after having affected all other countries; this fact cannot be easily explained. However, through the case of Dubai it was revealed that experience in crisis does not guarantee the effectiveness against a crisis; the country managed to exit the crisis even if the relevant pressure was extremely strong.
Dubai is country characterized for the power of its economy; the financial ...
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The effects were severe in the developed countries like US as compared to the developing nations like India. In this regard, different countries reacted to the crisis identifying the opportunities and the associated challenges.
This paper examines failures of real estate values and subprime lending; bad quantitative risk models in banks (Basel 2); rating agencies failures; underestimation of aggregate risks; mark-to-market accounting; shadow banking system; off-balance sheet financing; credit default swaps and over-the counter derivatives; moral hazard problem.
1). The problems in the United States financial system triggered almost worldwide repercussions and lead to regulatory responses on both national and international levels with calls for greater cooperation among countries to avert another crisis. In an attempt to prevent a reoccurrence of the situation and to deal with the problems that caused this crisis, both regulatory and market based solutions have been proposed (Chang 2010, p.
The primary cause of the global recession could be addressed to the collapse that occurred in the sub-prime mortgage market in the United States (US) accompanied by turnaround of housing as reported by several other economies. The impact of the global economic crisis not only affected the financial institutions but the livelihood of almost everyone to some levels or the other (Shah, 2010).
Economy affects all aspects of people’s life, which affirms the importance of monitoring the global economic performance. Countries have established numerous financial crisis regulations that aim at checking emergence of crisis in the future. Particularly, the OECD countries are presently practicing various regulatory measures to safeguard the world’s economy.
The author states that the subprime mortgage crisis was as a result of lending to people who were not qualified for such loans. Behind such crisis financial instruments and institutions are often the key drivers. The mortgage crisis was a complete loss of business by financial institutions which had enjoyed low risk lending to the mortgage sector.
The author contends that much of the damage that was done to the economy was as a result of the systematic undermining of the principles of good corporate management and the twisting of financial policies in ways that served the short-term interests of banking institutions and other connected players in the money market (Ferguson 26).
A main focus is the point of the economy before the US recession that sparked the global problems, versus the state of the economy presently in terms of what has changed. In both the US and the UK, government reaction to the crisis has been to institute a series
The US had relaxed its regulatory systems to enable banks to expand sources of profitability hence allowed securitization of lending in 2004 (Antonopoulos, 2009). Banks thus engaged in enormous borrowing to lend out and create securitization and investment banks
The main fault of the Board of Directors of Enron was to trust blindly on Arthur Anderson, the auditor who was continuously writing in favor of the financial condition of Enron during 1998, 1999 and 2000. The company has many reasons for failure which are as
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