FINANCIAL CRISIS

The Recent Global Banking and Financial Crisis

The Recent Global Banking and Financial Crisis

Introduction

This paper focuses on the function of global banks in increasing the riches in the world markets. It adds out the function of these banks in the US Financial Crisis and cites the difficulties with the US financial system. In the lightweight of US Financial Crisis (2008), what should be the alternate strategies? Does this crisis magic charm a doomsday for global banking super houses? Wealth maximisation was the axiom that has been going by car all the modern day corporations. To appreciate this supreme illusion, while some businesses have easily created new goods and with that new commerce, some other businesses attached to the age-old enterprise models, but expanded to new segments. Banking declines into the last cited category. (Kregel 2008 12)

Banks from the developed world, particularly those from US, expanded their dimensions and scope aided by globalisation and liberalisation. Sure, they have expanded their dimensions and scope, and with that they furthermore have increased their risk exposure. As evident from the US Financial Crisis, the so called global banks have become susceptible to changes in any part of the globe.

 

Discussion

The interaction amidst different financial institutions, encompassing some characteristics of the center stage of this interaction - the OTC market's - and the use of some financial innovations that produced in an amplification of the crisis. The item comprises four sections besides this introduction. In the first section, the structure of the global shaded banking scheme is presented. In the second section, the discussion focuses on the dismantling of these convoluted and obscure institutions. In the third section, an investigation is undertaken of the opaque network of interrelations between the banking scheme and the aligned financial scheme, with a focus on OTC markets. In the fourth section, a try is made at succinctly showing the likely repercussions of the compelled shrinkage of the shaded banking scheme and the direction of the enhancement of regulation and supervision structures. (Fundap 2008 45)

 

The Dissolving Down Of The International Shaded Banking System

Between June 2007 and November 2008, there were numerous particularly spectacular happenings in the course of the crisis, with powerful influences on the global interbank markets.8 These instants were mirrored in the demeanour of the so-called TED disperse - the difference between the rate of the three-month US Treasury papers (on the lesser market) and the Libor rate (London Interbank Offered Rate) for three-month deposits in Eurodollars - an international quotation for interbank borrowings, approximated at US$ 23.3 trillion in March 2008 by the Bank for international Settlements (BIS). In spite of the vertical drop of the US rudimentary concern rate and the blended reduction of the concern rates in the major developed finances in October and November 2008, the disperse between the US Treasury Bills and the Libor rate stayed at a high level. On the one hand, the grade of doubt stayed high on the interbank market.

The bankruptcy of the Lehman Brothers buying into ...