...SR/GFC/11‐9 SESRIC REPORTS ON GLOBAL FINANCIAL CRISIS – 9 SESRIC REPORTS ON THE GLOBAL FINANCIAL CRISIS European Debt Crisis and Impacts on Developing Countries STATISTICAL ECONOMIC AND SOCIAL RESEARCH AND TRAINING CENTRE FOR ISLAMIC COUNTRIES (SESRIC) 1 SESRIC REPORTS ON GLOBAL FINANCIAL CRISIS – 9 2011‐2 Issue EUROPEAN DEBT CRISIS AND IMPACTS ON DEVELOPING COUNTRIES July – December 2011 SESRIC Reports on Global Financial Crisis : The financial crisis which started in July 2007, when investors lost their confidence in the mortgage‐ and asset‐based securities in the United States, has deepened during 2008‐2009 with a global reach and affecting a wide range of financial and economic activities and institutions in both developed and developing countries around the world. As the crisis deepened, the governments of major developed and developing countries as well as international financial regulators attempted to take some mitigation actions and coordinate efforts to contain the crisis. Given this state of affairs, the SESRIC has been preparing short reports since May 2009 with the aim of monitoring the developments related to the current global financial crisis at the global, regional and national levels. In particular, these reports focus on the impact of the crisis on the economies ...
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...Executive Summary This business research report is focused on six specific areas; research questions, literature review, conceptual framework, methodology used and justification, research methods and ethical considerations. Having an understanding of the food and beverage sector within Novotel Hotels in the Sydney Metropolitan area and the challenges it faces is important, in this selected case study it not only is effected by the Hospitality industry but also the tourism industry as well. Both these industries have felt hard and negative impacts from the global financial crisis and have definitely had an impact on our case study. This business research report identifies the need to evaluate the relationship between a decline in international tourist, the change in food and dining trends and the revenue of Novotel in the Metropolitan area. The research follows the deductive research method. For the purpose of this report the hypothesis is Novotel food and beverage sector in Sydney metropolitan areas is making a loss and losing customers because of the global financial crisis. The research was conducted through a mixture of qualitative and quantitative research methods including; the report samples the primary research methods such as sample questionnaires, observational research and interviews. The secondary research methods mainly included personal communication and researching the hospitality databases, tourism and Australian Bureau of Statistics Website. ...
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...INTORDUCTION The Squam Lake Report is a brief volume that consists of the recommendations of a think tank of 15 leading financial economists in an attempt to provide direction on financial system reforms that might help anticipate and alleviate future Systemic Crisis. The report was written in 2008 in response to the crisis that was ongoing at that time. It is good to note that getting 15 scholars to agree on 37 recommendations is something worth of appraisal. However, one cannot but point that the report is somehow disjoint in its arrangement of chapters. I articulate that this slight disorder is because of the limitations of making 15 experts agree. This disjoint attribute has not prevented the report from being very constructive and direct in addressing very important policies and sensible issues relevant to reform. The paper has two central principles that the recommendation have been built on. The first is that policymakers have to consider how new regulations will affect not only individual firms, but also the financial setup as a whole. The second principal states that firms should be responsible for the costs of their failure and excessively risky positions. This principal aims at protecting taxpayers, the innocent bystanders, from the wrong doings of irresponsible corporate planning on the behalf of greedy market participants. These two principles can be considered the core of what is really the Squam Lake Group’s philosophy. Yet the report has its shortcomings. The...
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...national resources company. (Annual Report, 2009 pp. B) The BHP Billiton Petroleum sector has been the focus of big BHP investment dollars of late as the company looks to expand their operations. BHP-B Petroleum produced over 376,000 barrels of oil per day in 2009 and has maintained an impressive 9% annual growth rate since 2007. (Petroleum Annual Review, 2009 pp 5) BHP Petroleum operates in many countries across the world and is currently undertaking oil and gas projects in Australia, The Gulf of Mexico, Algeria, the UK, Pakistan and Trinidad and Tobago with the intention to expand into Malaysia, the Fawklands and Canada in the near future. (PAR, 2009 pp 5) The market for petroleum and indeed the mining industry as a whole was unsure what effect the global financial crisis would have and what action affected parties would take during the period. Regardless of the changes, such a large and important company as BHP would have to study the potential changes and start, if necessary, reformatting their financial planning/strategies and other control processes. These would have to be looked at on a whole organisational level; ranging from the BHP hierarchy all the way down to the smaller subsidiaries in order to accurately gauge the potential effects of the changes in the market. BHP put itself in a really good position early in the piece with its sensible investment strategy. BHP management identify, as they did in previous year reports, the need for caution whilst guiding...
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...Wall Street Financial Crisis Student’s Name Institution Date Paper Draft Introduction Background of the crisis. The effects and impact of the financial crisis. Results of preliminary reports. Sociological perspective of financial crisis The aspect of sociology in financial crises Senate’s investigative report The key players and their roles Why the workers remained unknowing The sociological explanation of the unpredictability of the crisis Conclusion Introduction The Financial Crisis of 2008 was described by economists, analysts and even sociologist as the worst and most devastating economic crisis since the 1930s Great Depression. It threatened a total collapse of huge financial institutions, banks bailout by governments, and major downturns in security's exchange around the world characterized this dark economic year. The housing sector in many areas in the world t also suffered, with the result being forced and unnoticed evictions (Coxe, 2005). Many people lost their jobs and there was a prolonged unemployment leading to family crisis and debts. Key businesses including banks failed and there was a huge decline in the consumer profits. The small unsecured financial institutions suffered the worst ever insolvency resulting from bank runs that characterized this period. The declines in consumer wealth were estimated in trillions of U.S. dollars. All these activities took a very short active phase, manifested as a liquidity crisis, and dated from August 9...
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...Corporate Governance Issues- Pre and Post financial Crisis By Unnikrishnan. P -ID No. 4317257 Session: Spring Year: 2013 Word Count: 1768 “Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society.” (Sir Adrian Cadbury, UK, Commission Report: Corporate Governance 1992). The concept of Corporate Governance (CG) in this corporate world has gained extra importance after the recent global financial crisis. Trading in the world has history of centuries and so do the existence of companies & business. The structure of company, its practices, the roles of key personnel, organizational behaviour, performance & goals got a new outlook in recent past when the collapse of Big firms such as Worldcom, Enron, Lehman Brothers etc. were witnessed despite their long history in business or their top ranking...
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...Briefing Note Introduction In 2007 to mid-2009, the world has suffered the worst financial crisis since the Great Depressions in 1920s. This followed by a wave of economic downturn. Learnt from the crisis, it is suggested that a forceful response by regulators, may help prevent deteriorating further. The objective of this note is to identify the crisis effects on both the financial system and the economy and to provide implications on further financial regulations. Effects Financial System: Many institutions collapsed in the USA and Europe within the period. Figure 1 directly shows a considerable rise of the number of bank failure particularly from 2008 to 2010 in the U.S. This deteriorated the macro-structure of many developed countries. Firms called for ‘bailouts’ or recapitalization from governments to help stabilize the financial system. Or, others were closed, forcibly merged with stronger counterparts, or recapitalized using taxpayer’s money. More effects are given below: 1. Banks have been hit hardly by deteriorating capital & liquidity problems and worsening market confidence. * Global banking sector lost almost half of the capital base at the beginning of the crisis in 2007 (Lybeck, 2011). * Low central-bank interest rate: concerns over deflation by monetary policy makers resulted in long-term low interest rates. Figure 2 presents that in the U.S., a slump of 4% in Federal Funds Rate to nearly zero in 2010 while Bank of England has held rates...
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...markets. These factors emerged over a number of years. Causes proposed include the inability of homeowners to make their mortgage payments, overbuilding during the boom period, risky mortgage products, increased power of mortgage originators, high levels of debts, bad monetary and housing policies, international trade imbalances, and inappropriate government regulations. In January 2011 The U.S Financial Crises Inquiry Commission reported its findings. It concluded that "the crisis was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve’s failure to stem the tide of toxic mortgages; Dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk; An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; Key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; and systemic breaches in accountability and ethics at all levels.“ This crisis is not merely seen as the result of the U.S. housing bubble's bursting or the collapse of the United States' subprime mortgage sector. The credit excesses that created this disaster were global. There were many bubbles, and they extended beyond housing in many countries to...
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...UID: 3035198791 Name: Ho Hei Man Course: CCGL 9030 The Credit Crisis of 2008 1.Introduction In the fall of 2008, a financial crisis originated from the U.S. resulted in losing trillions wealth, which affected not only U.S. itself, but all over the world. In this paper, I discuss factors leading to the credit crisis in 2008, explain policies that could have prevented it from happening, and state which of the proposed plans for reforming the financial industry would have the best chance of succeeding. The disscussion of this report is mainly based on the HBS report on the financial crisis. 2.Factors led to the credit crisis This section discusses the factors led to the credit crisis. 2.1 Low interest rate Since there was a relatively low interest rate for borrowing money from the US federal reserve because of the US government policy and foreign money from the ‘savings glut’ like China, Japan and Germany flowing to US, it resulted in relaxed credit conditions which banks and home buyers from the US can then borrow money easily. Thus, easy credits fuelled both hosing and credits bubbles. Low interest rates made mortgage payment cheaper, and it drove up the demand for homes, which helped in pushing up the housing prices. As the rapid increase in hosing prices, more and more borrowers to be priced...
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...Accounting professionals provide validity, signing off on annual reports, which directly or indirectly play a critical role in establishing and maintaining the confidence of the investors. Unfortunately, we are not learning from our past mistakes. History shows us that after every crisis, e.g the great depression of 1929, economic downturn of 1988, dotcom bubble of 2000, Enron and Worldcom issues, and finally the subprime mortgage crisis, there has been a need to appoint boards which recommended changes mostly pertaining to the accounting areas. Accounting professionals are constrained in providing information from data provided to them. While it is their responsibility to follow Generally Accepted Account Principles (GAAP) accounting standards, they do not have a crystal ball to predict the future, but they should have seen the crisis coming much earlier and played by the ethics rules and standards established by GAAP. Also, there is a caveat in the annual reports which says it is the management teams of entity who are responsible in ensuring integrity of data provided to the accounting professionals. The mortgage subprime crisis was driven by greed at many levels including at the homeowner, broker, lender, banks, and government levels. Accounting professionals should play a role in identifying "the train" and should stop the accident from happening much earlier. Economists, however, are better equipped to do so than the accounting professionals though. They should...
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...During the 2008 Financial Crisis Group 3 October 4th, 2011 Actors in the 2008 Financial Crisis U.S. Government European Union o Commission o Political figureheads Banks o U.S. o E.U. International Accounting Standards Board (IASB) Investors and External Regulators 10/3/11 2 Actors in the 2008 Financial Crisis (US Government) o Generally mentioned indirectly in the news articles o Not in the forefront of the case, as banks were driving policy o Presumably, wanted to allow U.S. banks to appear and remain competitive In the case of the financial crisis, being competitive meant not showing large losses on financial reports. Therefore, some leniency in accounting (e.g., use of Fair Value Accounting “FVA”) was allowed. Specific mechanism: move an asset from balance sheet (where assets must be valued at market price) to bank book until “maturity” of the assets 10/3/11 3 Actors in the 2008 Financial Crisis ( European Union „Commission & Figureheads“ ) European Commission o Reluctant to change accounting rules o Technical advisory International Accounting Standards Board (IASB) did not see FVA as a legitimate accounting technique o Agreed to FVA only under political pressure E.U. Figureheads (i.e., heads of state) o Initially, wanted to rely on advice of IASB o After the collapse of AIG and increasing use of FVA by banks in U.S., the EU figureheads had to allow banks in E.U. to have the same tool for their financial reports as banks in...
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...What caused the financial crisis of 2008 and who is responsible for it? My original intent for this paper was to argue that market failure, particularly in the housing sector, was the primary cause for the crash. Unfortunately my research has lead me in a different direction. According to the discussions we had in class that means I should be arguing from the perspective that the crisis was caused by government intervention then, right? I’m not so sure that’s the case either. Instead I’ll argue that the financial crisis of 2007-08 and the following “Great Recession” were the result of a perfect storm of both regulatory and market failure. Senators Carl Levin and Tom Coburn lead a 2-year long Senate subcommittee investigation into the crash. In April 2011 they released a 635 page report on their findings where they concluded that there was indeed no singular cause of the crash. The bipartisan subcommittee implicates several primary causes. Inflated credit ratings on mortgage related securities are cited as being “…the most immediate cause of the financial crisis…” The two primary rating firms, Standard & Poors and Moody’s had been assigning risk profiles to mortgage related securities similar to that of Treasury Bills – widely regarded as the most secure investment you can make since the government can just print money to pay you. In July of 2007 both firms did massive downgrades that exposed how risky these investments actually were. The downgrades resulted in a...
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...Declaration of Independence, 1776, [Online]). Although the circumstance in which it arose differed considerably, when coupled with the current financial crisis and its revelations of unethical practices, it is filled with irony. It is in this context that the report will adopt the position of internationl mandatory regulation as opposed to the voluntary option. For these ends it will employ several actors such as the Global Compact in order to demonstrate the organisations who are leading the way in Corporate Social Responsibility. However, as the report will show, due to its predatory nature, financial sector requires more than voluntary organisations. The crux of the argument is that regulation needs to be international due to the interconnectedness and interdependence caused by globalisation, and it needs to be mandatory due to the predatory nature of the financial system. Introduction: In light of the 2008 financial crisis, this report will argue for international mandatory regulations in the financial sector to enhance its Corporate Social Responsibility (CSR). The banks for International Settlement and the Basel Committee have made positive steps to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide (Banks for International Settlement , 2012, [Online]). However, the crisis of 2008 and its devastating effects, not only showed that more effective mandatory regulation needs to be applied to control a predatory industry...
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...EC3010 - Economic Policy Assignment 1 The nature of the ongoing financial crisis merely confirms what Economists have known for some time, namely, that the interconnectedness of global economic activity renders macro-management by single governments redundant. Their function is now to regulate markets to ensure economically efficient solutions. Module Leader :Paul McKeown Student Name: Chen JiaHui Student number: G20555142 1.0 Introduction This report argues that the ongoing financial crisis merely confirms the global political consideration what economists have known for some time. Firstly, it briefly explains how the financial crisis spread around the world in such a short time by globalisation. This report points out that the global financial system is inherently flawed, showing how economies go from stability to instability. Subsequently, it focuses on the link between economic globalisation and macro-management by single government, considering whether Macro-management of a country’s economy is redundant, given the global interconnectedness economy’s activity and business. This report shows government policy has reduced the effectiveness of interconnected economies, such as fiscal policy and monetary policy. After that, it emphasizes that it is imperative for governments to regulate financial markets so as to ensure economically efficient solutions. Consequently, this report concludes that although macro-management by single government is less effective...
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...the Financial Crisis? Christian Laux and Christian Leuz I n its pure form, fair-value accounting involves reporting assets and liabilities on the balance sheet at fair value and recognizing changes in fair value as gains and losses in the income statement. When market prices are used to determine fair value, fair-value accounting is also called mark-to-market accounting. Some critics argue that fair-value accounting exacerbated the severity of the 2008 financial crisis. The main allegations are that fair-value accounting contributes to excessive leverage in boom periods and leads to excessive write-downs in busts. The write-downs due to falling market prices deplete bank capital and set off a downward spiral, as banks are forced to sell assets at “fire sale” prices, which in turn can lead to contagion as prices from asset fire sales of one bank become relevant for other banks. These arguments are often taken at face value, but evidence on problems created by fair-value accounting is rarely provided. We discuss these arguments and examine descriptive and empirical evidence that sheds light on the role of fair-value accounting for U.S. banks in the crisis. While large losses can clearly cause problems for banks and other financial institutions, the relevant question for our article is whether reporting these losses under fair-value accounting created additional problems. Similarly, it is clear that determining fair values for illiquid assets in a crisis is very...
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