Banking of Uk

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1. The financial crisis of 2007/2008 and its impact on the UK and other economies Do you still feel vague about the causes and the effects of the financial crisis of 2007/8? Are you preparing for a job interview in either the private or public sector? The events of 2007/8 have shaped both the current UK commercial and business scene and are now having a massive effect on the public sector. Similar impacts are being felt across Europe and the wider world. Knowing a bit more about what happened might give you more confidence going into the interview! This leaflet will give you a basic understanding of the causes of the financial crisis of 2007/2008 and the impact which it had on the UK and other economies. Topics covered are:     …show more content…
Lenders will charge higher interest rates than for conventional mortgages as they seek to compensate for carrying higher risk). Banks became increasingly worried about both the value of their own mortgage books and particularly the value of the mortgage-securitised investments they had bought from other institutions As a result they became reluctant to lend to other banks in the short-term money markets. This crisis of confidence led to major liquidity problems for many banks and insurance companies worldwide. Liquidity means the ability of institutions, including banks, to meet their short term obligations including repayment of short term loans. The oil price eventually peaked at $147 per barrel in mid 2008. How did the crisis develop during 2008? The Bank of England had to provide financial support to the Northern Rock Building Society in the latter part of 2007, to prevent a run on the society’s cash by depositors. It became necessary to formally nationalise Northern Rock in February 2008 (i.e. the Government became its major shareholder, having used taxpayers’ money to support it). Early in 2008 a major US investment bank, Bear Stearns, had to be rescued by J.P. Morgan with US Government support. The crisis deepened in the summer of 2008 and on the 7th September 2008, two major US mortgage finance operations, Fannie Mae and Freddie Mac,
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