Debt and Exchange Rate

4733 WordsNov 18, 201219 Pages
University of Toronto ECO 349 Money, Banking and Financial Markets G. Georgopoulos Student name: Kaiji Lin Student number: 997800535 Assignment 1. Find a recent (August 2011‐ present) money and banking related article in the media (the Economist, Globe and Mail, National Post, New York Times, etc.,), and attempt to explain parts or all of it using the tools we learned in class. Highlight the sentences that you analyze, and hand in the article along with your work. Use written and graphical explanations. (approximately 3 double spaced pages) S&P downgrades top US banks' credit ratings By EILEEN AJ CONNELLY | AP – Tue, Nov 29, 2011 NEW YORK (AP) — Standard & Poor's Ratings Services has lowered its credit ratings for…show more content…
The decline in these financial institutions’ stock price is the result of uncertainties after downgrade. The major country that suffers from this is the United States, but also some global financial institutions will be also facing the same problems, some of them are Barclays PLS, HSBC Holdings, etc. S&P as a rating agency has been improving and changing their methodology of how to revise financial institutions’ performance after the bankruptcy of Lehman Brothers Holdings Inc. and Bear Stearns Cos. After changing their criteria about financial institutions’ credit ratings, they announced the downgrade. S&P is a research company which evaluates stocks and bonds, and it earns revenue from subscribers and financial assets issuers. S&P’s main objective is to provide reliable creditworthiness research to the investors or subscribers, however issuers also have to pay an amount of money to them for doing research, therefore a conflict of interest might exist. Investors and regulators may worry about this credit-rating agency to bias their report, because they might upgrade the rating to attract more business. In this case the downgrade may also involve conflicts of interest, which made this credit assessment quality to decline and increase the asymmetric problem that affect the financial market. Financial institutions serve as an intermediary that transmitted the funds from people
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