This dissertation is aimed at examining the apparently contradictory roles of bank regulation, as a means of enhancing economic activity and growth on the one hand, and as a means to impose risk control and crisis prevention, on the other hand. For decades, the global financial…
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The Basel Committee on Bank Supervision has proposed a set of new regulations, primarily aimed at improving capital adequacy and quality to increase the resilience of the banking industry, and to adopt a set of liquidity measures and controls to stem the accumulation of risk that had caused the last crisis. The proposals were consulted with the bank and financial institutions as well as other interested parties in the finance industry, but despite the clamor for tighter regulations, the proposals were generally poorly received. This study determined that the reason for this lies in the proposals’ tendency to micro-manage, to emphasize quantity at the expense of quality, to adopt general standards for all banks indiscriminately despite their fundamental differences, to introduce distortions that create disinformation, and to model the proposed standards after severe stress conditions not even experienced during the crisis. The results are expected to be greater cost-inefficiency, higher concentration risk, and poorer delivery of services by way of financial intermediation.
Chapter 1 introduces the research and the context in which it is conceived, its main research question and the objectives it sought to answer in order to arrive at a conclusion responsive to the research question; as well as the manner it carried out this inquiry. It also explains the importance of conducting research on the topic, and the significance of the conclusion to be arrived at.
The subprime mortgage crisis, strictly speaking, did not originate from the financial markets, but from the housing sector. If anything, the ultimate cause is traceable to faulty public policy on the manner of subsidizing housing for the lower income segments (Wachter, Pavlov & Pozsar, 2008). Logically, it should have affected the defaulting borrowers, the companies that enabled the mortgages, Fannie Mae and Freddie Mac, and the government that has given its guarantee, whether implicit or ...
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Banks and investors become wary of providing funds to financial institutions thereby forcefully increasing the cost related to debt products for borrowers. This also affects for individual borrowers as banks become more risk averse towards their loan portfolio.
This article mainly highlights the impact of the recent recession of 2008 on Unites States economy. The other part of this article highlights the key measures taken by the US government officials in order to rehabilitate the economy once again (2008 Financial Crisis & Global Recession, n.d.).
As International Labor Organization reported, unemployment has grown from 20 million to 50 million by the end of 2009 due to the crisis (Bresser-Pereira 2010, p. 499). This paper addresses the recovery process of the economic crisis especially in relation to the economic tools of monetary and fiscal policies that have been found to be effectual to reheat the crisis.
The US is currently recovering from its worst recession in over 25 years. Most econ-omists consider the rapid rise in housing prices (the bubble) and the subsequent col-lapse in that market to be the primary cause of the recession. Explain what housing market circumstances were responsible for the collapse of that market.
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.
This combination has been a growing problem in the past few decades. The origin of the global financial crisis can also be linked to the bursting of the oil price and housing bubbles, and excessive low interest rates among the key nations in the global economy.
Institutions like Lehman Brothers, Citibank, HSBC and many other global financial houses simply crumbled to the unwinding financial crisis. Though the exact causes of the crisis may not be easier to explore and understand however, lax regulations are considered as the major cause of the crisis.
When considering the possible causes for this economic situation, fundamental defect of the free market system is the prominent reason for the crisis. In the US economy, a secure and sustainable economic order is not ensured by the economic regulatory. As a result, banks and financial institutions in the developed countries are not restricted from spending more than what they can afford.
Credit crunch is marked by decreased corporate cash flows that lead to an increased demand for funds to perform the expenditure of companies, as in the case of a decrease in personal savings that will lead to an increased requirement for funds to run a household.
ilability of mortgage funding led to greater demand for housing, as people who never have qualified for credit received loans (subprime borrowers); combined with easy credit, a money inflow of several types of loans such as mortgage, credit cards were not difficult to obtain.
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