Reasons for Implementing Basel Iii
Reasons for Implementing Basel III and Its Costs
On Developed and Developing Countries
The global financial crisis (GFC) was a painful wound that marked the twentieth century. It was the greatest crisis the humanity has witnessed since 1930 (the great depression). It first started in the United States and spread then to the entire world and caused a considerable slowdown in most developed countries and has affected the financial markets and the growth prospects in developing countries. It is called the doubled jeopardy crisis as it spread rapidly with a contagious effect to the other countries of the world. Despite the efforts exerted by governments and central banks to rescue the economy from this huge recession through aggressive fiscal and monetary policies, demand in the macroeconomic level dropped. This huge crisis wasn’t the result of a person’s mistake but it was the result of cumulative effect of poor regulations from the financial institutions and from central banks, unregulated hedge funds, multilayered mortgages and the overrating by the credit firms. It first started by the bankruptcy of Lehman Brothers in September 2008 due to the large losses they sustained on the US subprime mortgage market and was followed by the failure of the seventeen largest banks in the US “the too big to fail” and six hundred other banks in the US. The federal bank was urged to rescue the too big to fail as their failure would have destroyed the whole world economy. The strong interconnectedness between the world countries through the stock market, foreign exchange and international trade led to a contagious crisis in the other countries. Houses prices in USA collapsed with a loss of $2.4 trillion during eight months hitting the balance sheets of banks exposed to the housing sector, which affected the entire US financial sector, and then, in turn, other developed and developing countries. A sharp decrease in the international trade and in the international stock markets
On Developed and Developing Countries
The global financial crisis (GFC) was a painful wound that marked the twentieth century. It was the greatest crisis the humanity has witnessed since 1930 (the great depression). It first started in the United States and spread then to the entire world and caused a considerable slowdown in most developed countries and has affected the financial markets and the growth prospects in developing countries. It is called the doubled jeopardy crisis as it spread rapidly with a contagious effect to the other countries of the world. Despite the efforts exerted by governments and central banks to rescue the economy from this huge recession through aggressive fiscal and monetary policies, demand in the macroeconomic level dropped. This huge crisis wasn’t the result of a person’s mistake but it was the result of cumulative effect of poor regulations from the financial institutions and from central banks, unregulated hedge funds, multilayered mortgages and the overrating by the credit firms. It first started by the bankruptcy of Lehman Brothers in September 2008 due to the large losses they sustained on the US subprime mortgage market and was followed by the failure of the seventeen largest banks in the US “the too big to fail” and six hundred other banks in the US. The federal bank was urged to rescue the too big to fail as their failure would have destroyed the whole world economy. The strong interconnectedness between the world countries through the stock market, foreign exchange and international trade led to a contagious crisis in the other countries. Houses prices in USA collapsed with a loss of $2.4 trillion during eight months hitting the balance sheets of banks exposed to the housing sector, which affected the entire US financial sector, and then, in turn, other developed and developing countries. A sharp decrease in the international trade and in the international stock markets
Bibliography: http://www.scribd.com/doc/37763055/The-Effect-of-the-Global-Financial-Crisis-and-on-Emerging-and-Developing-Economies http://www.odi.org.uk/resources/download/2523.pdf http://www.bm.ust.hk/gmifc/Prof.%20Allen%20%26%20Carletti_The%20Global%20Financial%20Crisis.pdf