...I. Credit card companies should not be on campus marketing to college students College kids and credit cards have been news lately, following a June 1999 report by the Consumer Federation of America (CFA) that blasted card issuers for luring unsuspecting students into debts. Sociologist Robert Manning, the author of the CFA study, was quoted in a Reuter’s story as saying: “The unrestricted marketing of credit cards on college campuses is so aggressive that it now poses a greater threat than alcohol or sexually transmitted diseases.” Most news stories took cues from Manning and touted the risks of credit cards on cash for students. By National On-Campus Reports, 6/15/2005, Vol. 33 Issue 12, p 34-35. II. Credit card companies target college students into applying. The now commons practice of card companies’ offering students credit cards is being portrayed as a way to lure students into an addiction to pilling on debt they can’t handle. Banks have become more aggressive and creative on luring college students to apply for credit credit cards. College students have been targets to banks for years because he or she does not have any financial obligations. Most of the nation's major credit card issuers are aggressively marketing unsecured credit to students (in their own name) through advertising, direct mail promotions and on-cam-pus recruitment, with giveaways like compact disks, mugs, candy bars, calculators, sunglasses, credit card-sponsored concerts, discounts on airfares...
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...THE SUBPRIME CREDIT CRISIS AND CONTAGION IN FINANCIAL MARKETS Francis A. Longstaff∗ Abstract. We conduct an empirical investigation into the pricing of subprime assetbacked CDOs and the resulting contagion effects on other markets. Using data for the ABX indexes of subprime CDO prices, we find strong evidence of contagion effects. In particular, we find that contagion effects spread first from lower-rated ABX indexes to higher-rated ABX indexes, and then from the subprime markets to the Treasury bond and stock markets. ABX index returns forecast stock and Treasury bond returns as much as three weeks ahead during the crisis. Furthermore, ABX index shocks are significantly related to contractions in the size of the short-term credit markets and increases in the trading activity of financial stocks over the next several weeks. These results provide support for the hypothesis that financial contagion was spread through liquidity and risk-premium channels. Current version: August 2008. UCLA Anderson School and NBER. I am very grateful for helpful discussions with Joshua Anderson, Vineer Bhansali, Bruce Carlin, Richard Clarida, Rajna Gibson, Rob- ert Gingrich, Hanno Lustig, Alfred Murata, Steve Schulist, and Jiang Wang, and for the comments of seminar participants at New York University, Pimco, and UCLA. All errors are my responsibility. ∗ 1. INTRODUCTION During the past year, financial markets have suffered catastrophic losses from the ongoing credit crisis. This crisis was initially...
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...Credit crunch and SME financing ----Take China as an example * * Shu Ruochen Noah 4063148 * Yuan Ziting Circle 40631 * Chou Xue Snow 40631 * * ABSTRACT ------------------------------------------------- SME are always important forces of social and economic development,and they play important roles in optimizing the economic structure, promoting innovation,easing social pressures and maintaining social stability.However, the world crisis was triggered by financial crisis in 2008 in USA, which has great impact on China’s economy, especially on SME.Since the credit crunch, SME are unable to obtain full production and operation funds needed timely,and Bank loans to enterprises are more cautious, so financing of SME will become more apparently difficult.Therefore, in order to solve the financing problems of SME, exploring development mode and long-term mechanisms which is adapt to economic structural has been an urgent strategic issues. * 1. Definition of credit crunch * A credit crunch is a sudden reduction in the general availability of loans (or credit ) or a sudden tightening of the conditions required to obtain a loan from the banks . * A credit crunch generally involves a reduction in the availability of credit independent of a rise in official interest rates . * 2. Background of Credit crunch. ------------------------------------------------- 2008 the financial crisis took place in USA...
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...Stockholm School of Economics 4307 Banking and Financial Intermediation Term Paper 16th October 2015 Authors: Aatman Ajmera- 40743, Abhilash Badami-40744, Lampros Baltas-40757 New Business Models: Peer-to-Peer (P2P) Lending Abstract: This paper evaluates the efficacy of the peer-to-peer lending model. While we primarily discuss the consumer loan market, the structure, principles and associated risks are fairly similar for other end markets as well. Contrary to popular opinion, empirical evidence from the limited available market data proves that P2P platforms do not have a lower cost as a percentage of loan receivables at this point compared to traditional banks. As these higher costs are primarily due to marketing activities, going forward, with scalability, they are poised to generate significant cost savings. Through our research, we conclude that P2P lending has a strong value proposition and the potential to disrupt the existing lending market, however, data quality, regulation and investor confidence will play a monumental role in determining the speed and magnitude of its success. What is peer-to-peer lending? Technological evolution, along with changing consumer behaviour, has led to a new era of innovation in financial services and subsequently more transparent and easy-to-use platforms. One of the new business models that has evolved, is peer-to-peer (P2P) lending. In essence, P2P lending is a form of debt financing which allows borrowers and...
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...activities depend a great deal on the availability of loans/advances from commercial banks. The term ‘loan’ refers to the amount borrowed by one person from another. The amount is in the nature of loan and refers to the sum paid to the borrower. Thus from the view point of borrower, it is ‘borrowing’ and from the view point of bank, it is ‘lending’. Loan may be regarded as ‘credit’ granted where the money is disbursed and its recovery is made on a later date. It is a debt for the borrower. While granting loans, credit is given for a definite purpose and for a predetermined period. Interest is charged on the loan at agreed rate and intervals of payment. ‘Advance’ on the other hand, is a ‘credit facility’ granted by the bank. Banks grant advances largely for short-term purposes, such as purchase of goods traded in and meeting other short-term trading liabilities. There is a sense of debt in loan, whereas an advance is a facility being availed of by the borrower. However, like loans, advances are also to be repaid. Thus a credit facility-repayable in installments over a period is termed as loan while a credit facility repayable within one year may be known as advances Merits of Granting Loans and Advances Loans and...
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...rewards included underwriting fee, interest payments, being a part of a big loan-financing project in Asia and developing networks and relationships with Asian governments and companies. This outweighed the risks of underwriting risk, credit risk and long-term collateral risk. In addition, we believe it was the correct decision to initially bid to lose and then change this approach once there was concrete support from the HK government. From Disney’s perspective, despite Chase’s standard commitment letter leaving them slightly vulnerable, choosing Chase as sole mandate made the most sense. Due to the unique nature of the loan (extreme long term, Disney’s desire to use operating cash flow for expansion and the principal collateral being non-existent for first 2 years), it made sense for Disney to choose a company that has a strong relationship with and one that was extremely flexible on the structuring of the loan. Finally, we believe the most suitable syndication strategy is to be Chase as the sole mandate with a two-stage syndication process and sub-underwriting (exhibit 8a) Chase Manhattan Bank made a smart initial decision by attempting to bid to lose. This strategy was ideal because due to the uniqueness of the loan it posed several credit issues. Firstly it was extremely long (15 years). In addition, the problems of Disneyland Paris, which boasted large initial capital expenditures and an overly aggressive capital structure meant banks had to tread warily and do their due...
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...that like to prey on the less fortunate or the naïve. Predatory people or organizations are eager to gain something out of someone else’s weakness or suffering. In the business world, these “predators” can take the form of those that the general public is supposed to be able to trust. Banks, finance companies, contractors, and any others that enter into contracts with consumers are generally to blame for this type of behavior. This behavior can come in many different forms. A few examples are: predatory lending, subprime mortgages, and unsolicited credit cards. Because these practices tend to harm consumers, more legislation has been put into place in recent years. Unsolicited credit cards are an example of a predatory practice. In this case, credit card companies would send out credit cards to consumers who had not applied for them. This led to an increase in identity theft. It is now illegal to send unsolicited credit cards through the mail. Predatory lending is probably the most common type of predatory business practice against consumers. According to Wikipedia, “an audit report on predatory lending from the office of inspector general of the FDIC broadly defines predatory lending as imposing unfair and abusive loan terms on borrowers” (Wikipedia, n.d.). Or the practice of a lender deceptively convincing borrowers to agree to unfair and abusive loan terms, or systematically violating those terms in ways to make it difficult for the borrowers to defend against...
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...to a “ perfect storm” where a number of storm systems just happened to combine to form a much larger, lethal storm. But one cause was the failure of decision- making models, both the model builders and the financial man-agers who relied on those models. One of the major players in this crisis was HSBC Holdings PLC, the third largest bank in the world based on market value, and the largest bank in Europe. In the financial meltdown of 2008— 2009, HSBC joined the other major money center banks in a collective failure. HSBC weathered the turmoil in the financial markets better than most of its rivals, mainly because it had profited from continuing growth in Asia, where it generates about 65 percent of its pretax profit. But the company’s stock prices have fallen by half from their pre- crisis high, and HSBC had to shed over 6,000 employees, close over a thousand branches worldwide, and write off its mortgage generating unit in the United States called Household International. Senior managers at HSBC had observed the incredible rise in U. S. home prices in the period 1990— 2000, and closely followed the subprime mortgage market which drove home sales ever higher in the...
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...have an outstanding credit rating, a bank can be unwilling to lend you the money because it can be left with nothing if you default on the loan. So, the bank may require 200,000 TL of collateral in order to lend you the money. This collateral should consist of financial instruments, houses, or even objects such as jewelry, art, or other things. You might also promise your business receivables as well. Why is that collateral important for financial markets and institutions? Collateral is an essential building block of financial markets and affects economic growth and financial stability. It decreases risks for lenders and borrowers alike, by providing safety to lenders and permitting borrowers to obtain more credit at good rates, and plays a main part in different market functions. However, policymakers regularly overlook the important role collateral plays in financial fixtures, the financial infrastructure and the different institutions that support trading, payments, clearing, and settlement and for the economy as a whole. Decrease of collateral value is the vital risk when securing loans with marketable collateral. Financial institutions carefully monitor the market value of any financial asset held as collateral and take suitable action if the value consequently declines below the predetermined maximum loan to value ratio. HOW IT WORKS? Let's suppose you would like to borrow 200,000 TL to start a business. Even if you have an outstanding credit rating, a bank can be...
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...Demica Report Series April 2009 Issue no.10 Research Report Strengthening the Links issue no. 10 Supply Chain Finance A Third Report from Demica Demica Report Series April 2009 Issue no.10 Summary Continuing tight credit conditions have made liquidity scarce. Corporations want to extend payment terms for their supply chain, but suppliers are finding it difficult or impossible to accommodate this requirement. Demica’s latest research report into Supply Chain Finance (SCF) compares the situation in the UK and Germany and reveals that 88% of UK firms and 55% of German companies have identified that key suppliers are unable to sustain further lengthening of payment periods. As a solution to this situation SCF is generating much enthusiasm amongst banks and their corporate customers as a means of substituting for lower credit availability. Supply Chain Finance structures not only allow large corporations to extend their credit terms with suppliers, but their suppliers can also use the credit quality of their receivables debtors to finance their receivables at favourable rates based on the individual debtor credit profile. Some 43% of German companies and 61% of British firms are planning to monetise their receivables/payables to provide liquidity within their supply chain. This report updates Demica’s first two Supply Chain Finance research projects from 2007 and 2008 and reveals that the majority of Germany and UK firms believe their banking relationships...
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...Acknowledgement First of all, I am expressing my sincere great fullness to almighty to prepare this term paper, no noble achievement can be achieve by an individual term paper depends on the contribution of number of people specially their thoughtful guidance and suggestions to complete this term paper. I am indented for their kind recommendation, submission, direction, cooperative and their collaboration. I want to give my special thanks to the Academic Supervisor Professor Md. Didarul Islam, Department of Accounting for his support and enormous help, especially his guidelines throughout the period of preparing this term paper. Declaration I do hereby Solemnly declare that the work submitted in the term paper titled “Sources of Short-Term Financing in Bangladesh” has been carried out by me and has not been previously submitted to any other university, college, organization for an academic purpose or certificate or diploma degree. This work that I have submitted does not break any existing copyright and no portion of this report is copied from any work done earlier for a degree or otherwise. I further undertake to indemnify the department against any loss or damage arising from breach of the forgoing obligations. Md. Golam Kibria BBA(hon’s) Final Year Reg. No. 09101626055 Major: Accounting Supervisor’s Certificate This is to certify that the term paper on “Sources of Short-Term Financing in Bangladesh” submitted for the award of the Degree of Bachelor of Business Administration...
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...Credit Risk Management of Prime Bank Limited University of Liberal Arts Bangladesh Internship Report Credit Risk Management of Prime Bank Limited Submitted to Sumaiya Zaman Senior Lecturer ULAB School of Business Submitted by Sadia Ferdous ID # 092011014 Date of submission 21 August 2013 Acknowledgements I would like to thank my supervisor, Sumaiya Zaman, Senior Lecturer, ULAB, for her guidance and feedback during this internship, without which I would have been unable to complete this task. I also express my gratitude to Prime Bank Limited for permitting me to do my internship in their organization. Special thanks to Credit Department of Shat Masjid Road Branch of prime Bank Limited for spending their valuable providing me with information, supervision and feedback during the course of my internship. I also like to thank the whole team of PBL for their help during my internship tenure. Page | 1 Letter of Transmittal August 21, 2013 Sumaiya Zaman Senior Lecturer ULAB School of Business University of Liberal Arts Bangladesh (ULAB) Subject: Submission of internship report on topic of ‘Credit Risk Management of Prime Bank Limited’. Dear Madam, This is my internship report on ‘Credit Risk Management of Prime Bank Limited’. I tried my best to work sincerely to cover all aspects regarding credit risk management at Prime Bank Limited. I hope you will find this report acceptable and thank you for allowing me to proceed with ...
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...INTERNSHIP REPORT ON LOAN ADVANCEMENT PROCEDURE OF IFIC BANK LIMITED LOAN ADVANCEMENT PROCEDURE OF IFIC BANK LTD. Submitted to MAHMUDUL HAQ ADVISOR BRAC BUSINESS SCHOOL BRAC UNIVERSITY Submitted by MST. NAZMUN FARZANA ID: 09104103 BRAC BUSINESS SCHOOL BRAC UNIVERSITY date oF SubmiSSioN 17TH DECEMBER, 2012 LETTET OF TRANSMITTAL 17TH DECEMBER, 2012 Mahmudul Haq Course Instructor, BBS BRAC University Dear Sir, Here I present my Internship report titled “Loan And Advance Operation of IFIC Bank Limited‟ with due gratitude and appreciation. As per partial fulfillment of the requirements for the BBA Degree, I have completed the internship from IFIC Bank Limited, Federation Branch, Motijheel, Dhaka. The internship program has given me the opportunity to learn about different aspects of this well reputed organization. Before facing the corporate world, I have gathered general idea about the organization culture and activities. However, I have gathered all the facts that I could within this short period and have tried my level best to exert all the things as much presentable as possible. Yours faithfully, ………………. Mst. Nazmun Farzana ID: 09104103 Acknowledgement At the beginning, I would like to express my sincere gratitude to Almighty, the most merciful and beneficial for empowering me to prepare the report within the scheduled time. I also want to thank especially to my internship supervisor Mahmudul Haq Sir for his inspiring guidelines, valuable suggestion, constructive...
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...Banks have also shown comparatively good result. The gross profits and the net profits of the Public Sector banks have been on a high from past few years. The private sector banks are also showing good results in case of profits. However, the only problem of the Scheduled Commercial Banks these days are the increasing level of the non performing assets. The Non-Performing Assets (NPAs) problem is one of the foremost and the most formidable problems that have shaken the entire banking industry in India like an earthquake. Like a canker worm, it has been eating the banking system from within, since long. It has grown like a cancer and has infected every limb of the banking system. At macro level, NPAs have choked off the supply line of credit to the potential borrowers, thereby having a deleterious effect on capital formation and arresting the economic activity in the country. At the micro level, the unsustainable level of NPAs has eroded the profitability of banks through reduced interest income and provisioning...
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...Credit Crunch An economic condition in which investment capital is difficult to obtain. Banks and investors become wary of lending funds to corporations, which drives up the price of debt products for borrowers. Credit crunches are usually considered to be an extension of recessions. A credit crunch makes it nearly impossible for companies to borrow because lenders are scared of bankruptcies or defaults, which results in higher rates. The consequence is a prolonged recession (or slower recovery), which occurs as a result of the shrinking credit supply The global credit crunch, which has dominated financial news headlines over recent months, continues to wreak havoc across the UK. Since it made its way across the Atlantic last summer the credit crunch has taken its toll in all financial sectors, and has made things difficult for both lenders and consumers. Many lenders have been hit hard, because the crunch has resulted in increased difficulties in getting finance on the wholesale money markets and increased costs relating to inter-bank lending. This means that lenders are finding it more difficult and more expensive to raise the finance that they need to fund their lending. Over recent months an increasing number of consumers have found that trying to get any form of credit has become more difficult and expensive, and this is because of the action taken by lenders to try and protect themselves as much as possible from the effects of the crunch. Lenders have raised interest...
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