The Financial Crisis Of The Fiscal Crisis

Better Essays

The 2007-2008 financial crisis is seen as one of the biggest failure of risk management. This is the reason why it has been described it as a credit tsunami.
The aim here is to look at the state in which the financial market is at the moment after being hit by the 2007-2008 financial Crisis. The first part of this report introduces some key issues that have affected the confidence in the banking sector and its importance in the banking sector. The second part will provide explanations on how to restore confidence.
Confidence is very vital in the banking sector.
The 07-08 financial crisis known as credit crunch as led the confidence in the banking sector to a dramatic fall. Evidences have been proved for example with customers redrawing their deposit form banks like northern rock.
As mentioned by Gerard Caprio (2005), a crisis always lives citizens cautious with their savings in the banking sector. Mistrust or lack of trust has led to the failure of banks like Northern Rock and Lehman Brothers.

Why has confidence been dented?

Finding the way to promote confidence is very important because it will be the key to prevent or avoid another financial crisis. A recent study has shown that bankers were making decision without knowing the securities of treasuries they were buying. Instead of basing everything on credit worthiness, banks were more focus on interpersonal and individual relations (Ingves, 2014).

The first problem was with the customer behaviour. Banks are

Get Access