Essay on Impact of the Financial Crisis on Banking Sector

2009 WordsJan 23, 20129 Pages
Impact of the Financial Crisis on Banking Sector The current financial crisis, which started in the Unites States, has dominated the headlines all around the world since summer 2007. The world has been experiencing one of the most severe crises such as the Great Depression from 1929. This started as a subprime crisis with problems in the subprime mortgage market in the USA in 2007 which spread throughout the world. This subprime turmoil turned soon to a global financial crisis and turnaround to a worldwide recession (Calomiris, 2008). The effect of the financial crisis resulted in problems in the financial systems of many countries. The objective of this paper is to get an overview of the impacts of the current financial crisis on the…show more content…
In other U.K. based failed banks are HSBC Holding PCL, Royal Bank of Scotland, Barclays Plc, HBOS Plc, Loyds TSB Group Plc, Alliance & Leicester (Anonymous, 2008). In the first stage of crisis UK based banks also showed that they have adequate capital to absorb potential losses but after September 2008 major banks declared their losses one by one because there was a sudden increase in the number of borrowers defaulting on loans due to decreased in commercial and residential property prices. Moreover, banks asked for help from the government to stop the further losses on lending. The government has taken to improve banks capital positions. As a result, the government injected capital to some banks in the shape of bailout packages. According to Bank´s Credit Conditions Survey in April 2008 reported an intention to increase the availability of corporate and secured household credit over the following three months. Governments’ actions should provide some support to lending over the coming year. In return for access to the APS, Royal Bank of Scotland and Lloyds Banking group, each of these banks made a lending commitment. In addition, Northern Rock has been directed by the government to no longer reduce its mortgage book. In contrast, Barclays and HSBC have announced an intention to expand their net
Open Document