The Financial Crisis Of 2007

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Introduction

The financial crisis of 2007 arose when banks, such as HSBC announced losses due to mortgages in the US housing market (BBC News - Global recession timeline, 2016). The crisis had a global impact as financial systems are interconnected. This crisis had huge impacts in many countries. In fact, in 2009, the UK Chancellor, Alistair Darling announced that the UK had a record debt of £175 billion (BBC NEWS | UK | UK Politics | Tax rise as UK debt hits record, 2016). This report will analyze this Financial Crisis. Firstly, the reasons for which the banks failed will be discussed and the future of such failing banks will then be analyzed. This report will then examine how to avoid a similar crisis in the future and the current and future legal regulations of the banking system.

Reasons for Banks Failure
The financial crisis of 2007 is well thought off by numerous economists to have been the biggest financial crisis since the Great Depression of the 1930s. Mortgage is one of the reasons why the bank crisis occurred. The banking crisis happened because the mortgages broker had no encouragement to determine the risk of the loans (imf.org, 2016). They were long-term loans expressed by the Bank or Building Society from depositor properties protected on physical asset. The risk is estimated on foundation of house owner’s capability to pay the allowance such as job prospects etc. The idiom Big Bang, used in reference to the unexpected deregulation of financial

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