Aspects of Banking Law



Aspects of Banking Law

Introduction

Banks are known as a single group because usually all banks are combined together and compete with the rival institution like finance companies, credit unions etc. but in reality, banks are divided according to the criteria. These criteria are different in different countries and change according to the time. But certain overlap was increasing time by time in the activities of the banking business which creates difficulties in the ways of banks. Now days, many of the banks increase their activities from core to multi functional. Increasing activities of bank is the one way of overcoming the laps which comes in the ways of bank.

Discussion

Crises in Banking System

Growing economic crises also increases the global financial stability. The banking system of U.S is on the disaster side because most of the banks have recorded more than $100 billion losses with the forecast of more than hundreds of million. These disasters create the banking crises all over the world because U.S banking system had dominated in the international developments for many decades.

Mortgage Losses

Mortgage losses in 2007 are now growing to the full blown financial crises in the U.S. In January 2008, Stockton Calif had 4200 homes but because of the financial crises, prices of the homes dropped to 70% and person face losses. In the city, many of the smaller communities like Stockton scenarios were facing the crises because of the decrease of price. Today, banks are busy in auctioning the house at low prices.

Reckless Lending

For gaining the higher profits, banks do not look at the loan applicants. Customers who come under the category of “subprime customers” are now targeted for the lucrative source of income. “Ninja loans” were provided to those customers who had no job, no income and no assets on hand. With ninja loans, incentives were also provided like no down payment and no interest other then loan payment. In such cases, no risks were attached for the customers.

Bank's Liquidity

This system is easily spread to the overall banking system through contagion. This system creates the weakness in the banking system and most of the banks become the creditors. It creates the systematic crises in the country.

Financial Liberalization

Because of the inadequate activity and premature financial liberalization, banking crises had been triggered. Bankers, managers and supervisors did not have the adequate resources and skills for managing the price risk competences in the financial market. In this way, liberalization was created which ignored the various risk related to the banking sectors.

Economic Stability

In many countries, banking crises occur after the period of economic instability like political uncertainties, balance deficit, changes in the prices of commodities etc. These situations create the deregulation in the interest rate which in turn increases the banking crises.

Example Of Countries Faced The Banking Crises

Brazil, China, India, Indonesia, Saudi Arabia were the countries that did not announce the measurement for controlling the fiscal outlays. While Mexico announced the 50 billion pesos limits on commercial paper. All the G-20 countries were affected by the ...