...Banking Regulation Page 1 Owning a home is part of the 'American Dream'. It allows people to take pride in a property and engage in a community for the long term. However, homes are expensive and most people need to borrow money to get one. Conditions were right for many people to achieve that dream in the early 2000s, mortgage interest rates were low, which allow you to borrow more money with a lower monthly payment. In addition, home prices increased dramatically, so buying a home seemed like a sure bet. Lenders understood that homes make good collateral, so they were willing to participate. In 2007, the US economy entered a mortgage crisis that caused panic and financial turmoil around the world. The mortgage crisis was a result of too much borrowing and flawed financial modeling, largely based on the assumption that home prices only go up. Greed and fraud also played important parts. Banks offered easy access to money before the mortgage crisis emerged. Borrowers got into high risk mortgages such as option-ARMs, and they qualified for mortgages with little or no documentation. Even people with bad credit could qualify as subprime borrowers. Fraud on the part of homebuyers and mortgage brokers helped make the mortgage crisis more serious. Mortgage applications were not checked for accuracy as well as they should have been. This is what started the subprime mortgage crisis, popularly known as the “mortgage mess” or “mortgage meltdown,” came to the public’s attention...
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...Growth of Banking and Development in India The world’s second largest populated country, India, is the apple of the eye for the world now. The world economies are seeing it as their potential market. This has been going on since quite some time now, ever since 1991 reforms of liberalization, globalization and privatization. Indian markets in urban areas have grown appreciably and are on the verge of saturation, so corporates have started tapping rural markets, since more than 60 per cent of India’s population lives in rural areas. During this global meltdown and fall of exports, if the Fast Moving Consumer Goods (FMCG) sector has been able to show rising quarterly growths, it is because of the Rural Markets and their rising spending power, which have not been affected by this meltdown. If we look at the strategies followed by Rural Marketers in the FMCG sector, it is to sell many small sachets of Rs. 2 shampoo pouches, Rs. 5 Maggi packs and the Rs. 5 chota Pepsi, because here, the strength lies in volume sale, considering the large consumer base in these rural markets which won’t spend altogether at once on buying large family packs of 500ml shampoo or super saver packs of Maggi or a Pepsi pet bottle of 2 litres. Therefore, consumption trends followed by the rural Indian are considered to be the driver of future growth of companies. And this trend of tapping rural markets is visible across all sectors now, be it FMCG, IT, Banking, education etc. For example, today...
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...CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF STUDY Nigeria banking sector has experienced a boom-and-burst cycle in the past 20-25 years. After the implementation of the structural adjustment programme (SAP) in 1986 and de-regulation of the financial sector, new banks proliferated mainly driven by attractive arbitrage opportunities in the foreign exchange market (Heiko 2007), but prior to the de-regulation period, financial intermediation never took off and even declined in the1980’s and 1990’s (Capirio and Kligbiel). The sector was highly oligopolistic with remarkable features of market concentration and leadership. Lemo noted that there are ten banks that control more than 50% of the aggregate assets of the banking sector, more than 51% of the aggregate deposits liabilities and more than 45%of the aggregate credits. The sector was characterized by small scale banks with high overheads; low capital base averaging less than $10 million; heavy reliance on the government patronage and loss making. Nigeria‘s banking sector was still characterized by a high degree of fragmentation and low level of financial intermediation up to 2004. This research work is motivated by the need to look into the Central bank (CBN)’s recent reform (consolidation) that employed certain measures to strengthen the Nigeria banking system by drastically increasing the minimum capital requirement from N2 million to N25 billion ($190 million-US). Through review of relevant literatures, analysis...
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...affected millions of customers and left some unable to access money within their accounts and delayed transfers to other banks. The huge backlog of account transactions took several weeks to resolve, and conflicting sources of blame were given by the company during this time. In March 2013, an additional incident occurred resulting in problems with online and phone banking, cash withdrawals, and debit card payments. A spokesperson had stated, “This problem was caused by a hardware fault and was not related to the issues we experienced last summer. It was much easier to fix, though clearly an unacceptable failure.” However, it is hard to believe that these problems were not the result of a systematic lack of internal testing and verification and conscience chain of command. As in the Hafford case, where a major IT decision was made without proper vetting, even minor upgrades in the banking industry are critical. Moments of interruption in service can result in customer dissatisfaction, required customer compensation, and regulatory fines. The main characteristic of an IT project failure within the banking industry is any unplanned interruption in service to their customers. For RBS, the above two IT failures caused trouble to millions of customers. This is also the case for Hafford, where their...
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...Argentina’s 1980-1982 Banking Crisis In Argentina’s crisis of 1980’s financial institutions were forced to rely heavily on Central Bank financial assistance when they encountered deposit withdrawals. The largest investment bank and the second largest commercial bank failed. More than 70 institutions had to be liquidated or placed in intervention between 1980 and 1982. Bank Runs: After Mexican Peso Crisis, foreign investors’ feared Argentina with a weakening economy would devalue its currency, initiated a capital flight. As a result, lower wages, lower salaries, and high unemployment rates began to rise. Widespread fear of a financial meltdown triggered Bank Runs. Suspension of Payments: Banks, suspended payments denying the ability to withdraw funds. Debt for Deposit Swap: The government offered government bonds swap for deposits with few takers. Deposit Insurance: The Central Bank established a deposit-insurance program to rebuild confidence. Bank Nationalization and Restructuring: The Central Bank closed some banks, and nationalized others. The 1982-86 Banking Crisis in Chile Reaction Phase Toxic Assets Removal: Banks were assessed for their long-term viability. Viable banks sold ‘bad loans’ to the Central Bank, with a repurchase agreement. Most banks used this facility to the tune of $5 billion. Liquidity Enhancement Central Bank’s Secured and subsidized Loans on Collateral: Government provided secured loans (using bank assets as collateral)...
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...AIG can be described as 'too big to fail'. This logic is that if financial firms or corporations go under it can drag others with them (Fernholz, 2009). AIG the insurance giant provides insurance cover for major companies and individuals in the U.S and other countries. If the company went bankrupt then a lot of losses could be felt in the economy as millions of covers and policies go unpaid. While we may not be able to fully blame bankers and other corporate heads for the economic meltdown that followed a market-wide failure in 2008, but it does seem that bankers want to take advantage of profits when the economy is good and then pass the burden to taxpayer when it is bad. Government assistant in any economy is only necessary when there is absolute instability in the financial system such that health of the economy is completely at risk. However, we need these corporations to take accountability for their actions, and not just hand them a bailout every time we have a financial meltdown and if they do receive a bailout their...
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...understand the reason behind the nerve wrecking recent financial crisis that hit USA and then the world’s economy. The film is divided into five main parts, covering a wide scope- Who, what, when, why, how… it is all answered! Unlike most other documentaries that have been released over the past several years, ‘inside job’ bases its arguments on numbers and facts and doesn't just emotions. The first part of the movie- “How we got here?” Takes the viewers back to history in the 1930s when US had a strong financial system. The regular banks were local businesses and were not allowed to mess around with the depositor’s money. The investment banks were private partnerships and thus did not make risky investments. The journey of US’s finance and banking sector towards its own self destruction began under the regime of president Ronald Reagan who introduced a lot of deregulation policies which continued under the Clinton and Bush administration as well, with the advice of the likes of Alan Greenspan, Larry Summers and Robert Rubin. Abolition of the ‘Glass Steagall Act’, banning regulation of...
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...The industry environment that Wells Fargo is a part of is made up of threats of new entrants, supplier power, buyer power, and substitute products. When it comes to the threat of new entrants in the financial industry there is no threat for Wells Fargo. The financial industry requires a lot of capital and trust. Currently none of the industry has a lot of trust but they do have capital to make investments and decisions that a new entrant to the industry does not have. There is an extremely high entry barrier in the financial industry. When it comes to supplier power, the supplier concentration is mainly related to capital in the financial industry. With capital being difficult to obtain, the suppliers do hold a lot of power over the financial industry. One of Wells Fargo’s advantages is that that they hold a large amount of capital and have the ability to invest and keep mortgages on their own portfolio. Buyer power is high in the financial industry. The financial services industry is a service based industry, meaning if they do not please the consumer then they lose the customer. The products available by the financial industry are very similar. Although Wells Fargo puts a lot of effort into differentiating their product, the customer will go elsewhere if they feel as though they are not treated right. . Rivalry among existing firms exists between Wells Fargo, and the three following competitors: US Bancorp, Bank of America and Citigroup, this being said there is a...
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...Introduction IT industry and Globalisation 2008 Financial crisis and Impact on Indian IT sector Response steps taken by Indian IT firms (HCL, Infosys and TCS) Conclusion Introduction IT industry belongs to the servicing industry in India since India has not grown completely as Indigenous product developers in IT domain. So the growth and performance of Indian IT industry is completely attributed towards the institutions and organisations to which the software solutions or servicing is exported. It is very tough to comprehend and list out the types of macroeconomic shocks that an IT industry would face. The main reason for this would be IT sector as a whole doesn’t provide its software solutions not just one sector. It provides software solutions to almost all of the sectors like Manufacturing, Retail, Insurance, Banking, and Media, Entertainment so much more and still has scope in so many unexplored domains. Since the onset of globalisation in the early 90s, large capital influx and the crises that could be attributed with it have become one of the known risks. Large flows of capital into another country has created currency crisis in most of the countries. The most predominant of these shocks was recorded was in the East Asian countries. India never fell prey to these shocks and was effectively insulated from these shocks, until it has opened up its markets for investment by foreign players. The globalization and reforms of 90s...
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...feedback loop between the financial system and the global economy. Such a comprehensive approach—if well coordinated among countries—should be sufficient to restore confidence and the proper functioning of markets and avert a more protracted downturn in the global economy. Significant writedowns have already been realized, but more may lie ahead. . . The estimate of aggregate write downs by IMF based on global holdings of U.S.-originated and securitized mortgage, consumer, and corporate debt has risen to $4.1 trillion (versus $1.4 trillion in Oct. 2008), largely due to higher-than-expected losses on prime mortgage loans and corporate debt and wider spreads on related securities. Causes for US financial meltdown: The current financial meltdown shares one...
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...leadership of the organization identified mobile banking as a new field within the financial services industry to help provide faster, easier, and more convenient services to its customers. Mobile banking offers an opportunity for BoA to increase its operational efficiency and customer retention. The key challenge facing management is both tactical and strategic in nature. From a tactical perspective, management is faced with the problem of deciding which functionality of mobile application the Mobile Product Development Unit of the organization should firstly implement and which other business unit the organization should focus on. From a strategic viewpoint, management is faced with the problem of positioning itself within the industry. The financial services industry is fast-paced with tight competition. As such there is increased pressure on management to position itself in the long-run in order to be able to compete with other major players within the industry. Analysis and Evaluation The financial services industry serves as a vital component of the United States economy. The industry caters to commercial, private, and governmental needs. Historically, Bank of America has always differentiated itself as an industry leader. However, the economic meltdown of 2008-2009 tested the industry’s vitality. The near-collapse of the real estate industry caused a major reorganization and reassessment of the business practices within the industry. More importantly, the economic collapse...
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...dollars; 30 million unemployed; and doubled national debt of US. What happened? The movie starts out talking about Iceland and how it quickly succumbed to a financial crisis after privatization of the banking industry in just a short period of time. The documentary then goes into depth with how the collapse of Lehman Brothers and AIG caused the economic crisis of 2008. It discusses how deregulation in the banking industry led to greed of the bankers, rating agencies and regulators. This greed led to a lot of wealthy business and CEO’s but led to 100s of thousands of people losing their jobs, homes and livelihoods. They also lost confidence in the government and the ability to protect them from future failures. What caused it? The movie suggest that deregulation in the financial industry was the main culprit of the crisis. “Scaling back of government oversight and the weakening of checks on speculative activity by banks began under Reagan and continued during the Clinton administration. And with each administration the market in derivatives expanded, and alarms about the dangers of this type of investment were ignored.” This coupled with the housing boom and the subprime loan market was a recipe for disaster. All the signs were pointing in the direction of an economic meltdown, however they were mostly ignored. There was one bad risk on top of another one almost everywhere you looked. Everyone seemed to be prosperous and making money right before the crisis, even...
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...Ethical Issues Ethical Issues - Why are ethical issues a major concern in organizations? What individual influences impact ethical behavior? How can organizations influence ethical behavior in employees? Use a recent article from the Wall Street Journal, or other reputable publication, for an example of ethical issues being addressed by a corporation today. Ethics is a major concern and plays a significant part of the US society it is a crucial part in the world of business. The Unique characterization of ethics all though it is part of law ethical behavior comes down to what is right and what is wrong ethically. This paper will look at ethical behavior within an organization. It will look at what is right and what is wrong ethically and moreover how it affects society within an organization. It will reflect on some history of ethics to describe and discuss ethical behavior. Ethical behavior can have an enormous impact either positive or negative, ethically, financially, and emotionally to the people who make up the organization. We will look at why is ethical behavior a major concern within an organization. It will look at the individual influences impact of ethical behavior. Finally, how an organization influences ethical behavior in employees. Ethics is a term that has existed in years before (BC) and continues to exist today. Ethics is philosophical moral treatment of the moral order. According to Socrates the ultimate object of human activity is happiness and...
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...across the globe politically, economically and culturally. Economic globalization refers to the process of increasing the economic integration between two or more countries which leads to the emergence of a worldwide marketplace or a single global market. The international Monetary Fund defines globalization as “the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, freer international capital flows, and more rapid and widespread diffusion of technology”. At the same time, the International Forum on Globalization defines globalization as “the present worldwide drive toward a globalized economic system dominated by supranational corporate trade and banking institutions that are not accountable to democratic processes or national governments.” The two definitions vary and so depending on the paradigm, the aspect of globalization can be seen as both positive and negative effects. Nonetheless, globalization has cultural, political and technological factors that are closely intertwined. All these factors are essential to a person’s quality of life, the social costs and benefits brought upon them by the idea of globalization brings about different views on globalization (Gelinas, 2009). This essay is aimed at examining the aspect of globalization in various economic processes and areas to bring out an understanding of globalization. While some theorists are in great support of...
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...ASSIGNMENT WEEK 2 Globalization in the twentieth and twenty first century is usually analyzed from an economic or technological perception, that is the internet, international markets and global institutions such as IMF, WTO cable news etc. The impact of globalization on the economies of countries across the world whether developed or developing cannot be over emphasized. An important ingredient in globalization is trade liberalization. . Economic liberalization is the process of achieving unobstructed economic activities, it seeks to remove all hindrances to trade, production and investment, whiles emphasizing on the freedom of economic activities (Onyekpe, 2001:52, Akinboye, 2008). In this light I will want to associate myself with the argument brought forward by Peter Mandelson in support of globalization. Globalization can be described as a “double edged sword”. Countries and companies which are prepared can take advantage of the opportunities that it brings on the other hand, globalization is not ready to “forgive” countries or companies who are not prepared to take the dynamics of globalization. Even the developed countries in Europe and the USA cannot afford to be complacent in the face of globalization. Peter Mandelson has done a good job in explaining both positive and negative effects of globalization in his defense of globalization. Peter Mandelson analyzed the impact of globalization under six headings namely, the openness boom, the interlinked world, the challenges...
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