Friday, October 4, 2019

The transformation in the banking system in the lead-up of the Global Essay

The transformation in the banking system in the lead-up of the Global Financial Crisis - Essay Example The paper tells that the Global Financial Crisis started with the collapse of biggest (in terms of financial status and business of these companies) financial companies of the world, including Merrill Lynch and Lehman Brothers. The crisis situation became worst in 2007 when financial intermediaries like banks of USA were in a position to announce themselves as bankrupts. In this time the US government intervened into the matter and provided the necessary financial support to these banks and financial intermediaries and slightly controlled the crisis situation. The financial crisis situation occurred because of the strategy of those financial intermediaries to provide various types of loans, such as house loans, car loans etc., to individuals and business organizations. The crisis situation became worst when these loans or hedge funds have been circulated to different layers in the banking transactions all around the world. Increase in the layers of providing loans to different sectio ns of the world economy has caused these financial intermediaries to suffer from greater risks of default of loans. The risk has been at high because default of one of the person or organization could have resulted in the default of the entire system of circulation of loans. In the mid-2007 this has actually happened and the entire financial system of the country collapsed. This crisis situation eventually transferred into several other countries of the world, including developed countries like United Kingdom, Australia, New Zealand, Japan, and developing countries like India and China (James, 2011, pp. 19-22). With significant disturbance in the housing markets of USA economic and financial systems of countries across the globe has been disturbed and financial companies started to reduce their economic as well as financial activities which in effect reduced the level of economic activities across the globe. In the beginning of 2008, greater liquidity crisis in the US financial mark et and in the US banking system caused countries across the globe to suffer from severe financial crisis situation. The reduction in housing prices and real estate prices across the US caused many large financial intermediaries and banks to suffer from loss of capital and funds. These have eventually reduced the amount of investments made in the process of developing world economies and hence countries started to suffer from severe financial crisis as well as debt crisis. During this time most of the effected countries tried to implement various policies and strategies to transform the banking system to reduce the effects of the Global Financial Crisis (Campbell, 2011, pp. 217-219). Transformation of banking in New Zealand: After the introduction of the Global Financial Crisis in the period of 2007 and 2008, many countries started to implement various macroeconomic as well as various microeconomic policies in order to reduce the intensity of the crisis to affect these economies. New Zealand also affected badly like other developed nations of the world by the Global Financial Crisis and hence, the government of New Zealand took several policies to transform the financial system of the country into more financially stable and operationally strong position. The financial system

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