Financial Crisis Reasons

(a) The current fiscal crisis originated with a liquidity crunch in the United States is caused by (1) the global macro policies affecting liquidity, (2) the financial market factors and (3) the poor restrictive system and (4) the inherent general risks. (1)The Macroeconomic factors 1. The excessively low concern rates in major economies including US and Japan, 2. The huge US trade deficits requiring borrowing large sums from abroad, 3. The accumulation of reserves in sovereign wealth funds to fill the liquidity reservoir to overflowing. (2)The Financial food market factors 1. The origination and distribution of the new financial products, including MBS, CDO and CDS, is in such(prenominal) a fashion that passing all the risks to the next mathematical group down the line. 2. The excessive off balance-sheet financing exposed the banks to high up liquidity risk; 3. The increasing financial sector tightfistedness that the failure of just one of the big firms would pose a systemic risk. 4. The inaccurate credit judge by the rating agencies; 5. Inadequate quantitative methods to evaluate the new products; 6. The poor callable diligence process and the weak underwriting standards, (3)The poor regulatory system 1. The regulatory framework failed to keep up with trends in finance; 2.

The over-reliance on the self-regulatory virtues of markets 3. The failure to regulate the shadow banking system (4)The systemic risk 1. The conflict of interest among market participants; 2. The inadequate incentive structures and compensation schemes in the industry that encouraged the excessive risk-taking; (b) A banks crownwork is the difference between the value of a banks assets and its liabilities. It prat be thought of as the margin to which creditors are cover if a bank liquidates its assets. Thus a high dandy level will protect the creditors against unforeseen losses or a lack of liquidity that could break the banks. A touchstone for the... If you want to get a full essay, order it on our website: Orderessay

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