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Presentation Global financial crisis


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Presentation Global financial crisis

Presentation Global financial crisis

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  • 2. Impact Of Global Financial Crisis Impact on Stock Markets Globally Losses to Investors Freeze in Inter Bank Credit Increasing Unemployment Decline in Businesses Globally Bailouts
  • 3. INTRODUCTION  “Subprime" refers to loans that do not meet Fannie Mae or Freddie Mac guidelines  This is generally due to one or a combination of factors, including credit status of the borrower, income and job history, and income to mortgage payment ratio  The crisis represents the other side of a phase when a low rate of interest, rising home prices and mortgage securitization brought huge gains  Some termed it as the beginning of “the second great depression” because of the enormous dislocation  Borrowers are considered as subprime because of poor credit history & limited income and Lenders considered as subprime because of greater risks & high returns
  • 4. CAUSES OF SUBPRIME CRISIS  Beginning in the mid-1990s, government regulations began to erode the conventional lending standards.  Fannie Mae and Freddie Mac hold a huge share of American mortgages  The Fed’s manipulation of interest rates during 2002-2006  An SEC Rule change adopted in April 2004 led to highly leverage lending practices by investment banks and their quick demise when default rates increased.  Doubling of the Debt/Income Ratio of Households since the mid-1980s
  • 5. PROCESS OF SUBPRIME CREDIT CRISIS Economic Environment  Low interest rates  Property bubble  Deterioration of financing standards  Sluggish regulation  Financial innovation  Lack of transparency  Burst of property bubble Reaction of financial institutions Excessive financing – search for yield Spreading risks via securitization where the original risk can not be seenTightening credit conditions Problems in fulfilling subprime mortgage obligations
  • 6. SUBPRIME CRISIS & ITS SPREADING IN THE GLOBAL FINANCIAL SYSTEM Financing possibilities have narrowed Cost of financing has increased Problems in fulfilling subprime mortgage obligations Losses of financial intermediaries and investors Reassessing risks, and risk-taking (banks, funds, investors) Increase in counter-party risk, losses of confidence Impact on financial markets and real economy
  • 7. Impact Of SUBPRIME CRISIS  Stock Market  Capital Market & Asset Market  Financial Institutions  Home Owners  Rate of Unemployment  Minorities  Liquidity & solvency Crisis
  • 8. INTRODUCTION  The term indicates the financial woes caused due to overspending by come European countries  This is also known as Euro Zone sovereign debt crisis  When a nation lives beyond its means by borrowing heavily and spending freely, there comes a point when it cannot manage its financial situation  The euro's value has decreased over the past few years due to the European Debt Crisis.
  • 9.  The Euro Debt Crisis began in 2008 with the crash of Iceland’s banking system, which spread to Greece  Spain, Portugal, and the other nations later followed Greece COUNTRIES STATISTICS France Debt/G.D.P: 81.7% Unemployment. Oct 2011: 9.8% S&P Rating: AAA Germany Debt/G.D.P: 83.2% Unemployment. Oct 2011: 5.5% S&P Rating: AAA Greece Debt/G.D.P: 142.8% Unemployment. July 2011: 18.3% S&P Rating: CC Italy Debt/G.D.P: 119% Unemployment. Oct 2011: 8.5% S&P Rating: A Portugal Debt/G.D.P: 93% Unemployment. Oct 2011: 12.9% S&P Rating: BBB- Spain Debt/G.D.P: 60.1% Unemployment. Oct 2011: 22.8% S&P Rating: AA
  • 10. CAUSES OF EURO ZONE CRISIS  Slow economic growth of the euro zone countries  Stress on banks around the world led to shrinking credit availability  Increase in Government spending & Declined in tax revenues  Falling in Demand lead to decrease in Imports & Exports  Housing bubbles burst in UK , Ireland, Spain as well as US  Austerity has become part of the problem instead of the solution
  • 11. Impact of EUROZONE CRISIS  Interest Rate Policy  Fiscal Policy  Rate of Unemployment  Financial Market  Credit Policy & Debt Crisis  GDP Growth
  • 12. THANK YOU
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