The Global Financial Crisis - 1474 Words

The global financial crisis has raised many concerns for the need to restructure the approach of risk and regulation in the financial sector (KPMG 2011). Figure. 4 has shown the structures of Basel III. It aims to increase the capital and liquidity of banks and therefore maintaining the stability in banking sector with full effect in 2019 (Banks For International Settlements 2011). EUROPE - Preparedness On 26 June of 2013, Capital requirement regulation (CRR) and directive(CRD) has been adopted for Basel III in Europe. Basel III permits the capital buffer increase gradually to 2.5% in 2019 (Banks For International Settlements 2011). There is minor deviation in adapting this approach in Europe. Given that small institution may adapt Basel†¦show more content†¦Secondly, banks will have a more accurate estimate of liquidity by doing cash-flow forecasts and portfolio analysis(Philipp et al. 2010, p. 16). By having a better understanding, banks can then adjust their asset to adjust their short-term asset and liability structure(Philipp et al. 2010, p. 16) to ensure they can fulfill the new capital requirement. More specifically, taking BNP Paribas as an example, it cuts dividend to increase retained earning to boost CET1 capital and sell impair Greek sovereign debt to reduce risk weighted asset (Yuting et al. 2012). From our point of view, banks are all computing different strategies regarding on their own company-specific risk. However, it is common for banks to cut dividends in order to meet the CET1 requirement (Yuting et al. 2012), which deteriorate shareholders’ interest. Potential Challenges: (1) Capital stress (2) Funding stress For simpler explanation, four banks from Europe are selected namely, BNP Paribas, Banco Santander, Deutsche Bank and Unicredit for comparison. The European Banking Authority (EBA) requires banks to reach a Common Equity Tier 1 ratio of 9% by the end of June 2012 (P.15HECparis). This period is shorter than the one set by Basel III. This imposes extra stress on banks to increase their liquidity within a short time. Furthermore, EBA has also decided a Stress Test in 2011 based on the RWAs, CET1 and buffer. Compared to other banks, Banco Santander in Spain would have the largest shortfall ofShow MoreRelatedThe Global Financial Crisis And The Crisis Essay1244 Words   |  5 PagesIntroduction The Global Financial Crisis, also known as The Great Recession, broke out in the United States of America in the middle of 2007 and continued on until 2008. There were many factors that contributed to the cause of The Global Financial Crisis and many effects that emerged, because the impact it had on the financial system. The Global Financial Crisis started because of house market crash in 2007. There were many factors that contributed to the housing market crash in 2007. These factorsRead MoreFinancial Crisis : A Global Crisis Essay1729 Words   |  7 PagesOverview: The 2008 financial crisis is notably one of the worst financial disasters in American history. It began with a large financial bubble, in which many investment, real estate, and insurance companies made millions. When the bubble burst, stock markets fell, these companies collapsed, and economies of supposedly strong nations were brought to their knees. Not only did the financial crisis severely affect the economy of the United States, but the international markets as well. At the timeRead MoreGlobal Financial Crisis : Crisis1213 Words   |  5 PagesGlobal Financial Crisis In July of 2007, the global financial crisis was initiated from the property market in the United States. The crisis was criticized regarding to a security called sub-prime mortgages. Sub-prime mortgage is an idea created by the financial institutions to gain more profit by easily giving loans to lower income borrowers or low credit rating borrowers. When the borrowers default the loan, the bank then have the right to take away the ownership of the property and sell it forRead MoreThe Global Financial Crisis642 Words   |  3 PagesThe Global Financial Crisis has had a huge impact on the global economy. The American housing market collapses, the house price drops significantly and the bank is losing lots of money, however, people are not pursued in court for money or declared bankruptcy. People tend to spend less on the due to their houses worth less than the bank has loaned originally and some of them are still committed to clearing off their mortgages. This causes less activity in housing market and sales market, hence moreRead MoreThe Global Financial Crisis1580 Words   |  7 PagesIn the following essay, I will briefly summarize some of the main events leading up to the global financial crisis. Following this, I will discuss the effect this had on the banks and ergo the credit supply, then examine how this contributed to t he corporate failure. I will also pay some attention to how the market imperfection can affect firms real decisions. Finally, I will sum up the main points of the essay. The banking panic of the fall of 2008 set economies around the world into a severeRead MoreGlobal Financial Crisis1408 Words   |  6 Pagesis explained the occurrence of the global financial crisis in 2008. It has shown that lots of companies have bankrupted and millions of people lose their jobs and homes around the world. Such as United States, Iceland, England, France, Singapore and China. There is a sentence in this film has make me impressed, which is â€Å" the poorest always pay the most.† The director has separated this film into five parts, which are How we get there, The Bubbles, The Crisis, Accountability and Where we are nowRead MoreThe Global Financial Crisis711 Words   |  3 PagesThere is no smoke without fire. The global financial crisis caused from hundreds of thousands of decisions and changes from different areas. The America government, Wall Street and the Rating Agencies put on this world-shaking show together. And to be more specific, the top officials in politics and finance pull strings behind the senses. Applying Mintzberg’s ten management roles model as a frame, the America government, Wall Street and the Rating Agencies are correspondingly divided into three categoriesRead MoreGlobal Financial Crisis 1067 Words   |  5 PagesThe best evidence so far for the existence of an American empire, despite denials to the contrary, is the Global Financial Crisis (GFC). The persistent removal of restrictions and oversights on the domestic financial system of the US, combined with the decisions of individual firms, other governments and foreign financial organisations, culminated in the singe largest depreciation of assets and currency valuations in history, surpassing even the Great Depression in its extents. The United StatesRead MoreThe Global Financial Crisis2317 Words   |  10 PagesDuring the run-up to the Global Financial Crisis (GFC) 2008 there were numerous contributing factors. One can observe the start of the crisis as a cascading timeline starting possibly decades earlier with the change to a deregulatory culture. The prevailing political environment in the lead up to the financial crisis was one of de-regulation with a focus to economic expansion. This political imperative towards deregulation started under President Reagan in the US and culminated at the turn of theRead MoreThe Global Financial Crisis3204 Words   |  13 PagesThe Global Financial crisis, which is believed to have begun during July 2007 due to a credit crunch was caused because there was a large liquidity crisis due to lack of confidence amongst the US investors in judging the value of the subprime mortgages. (Davies, 2014) Now let’s look at what happened at the 2008 global financial crisis. I am not getting into the details but just giving a simple overall picture of what went wrong. The years just before the crisis saw a flood of irresponsible mortgage