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Assignment on Financial Crisis

   

Added on  2020-06-06

15 Pages5104 Words38 Views
FINANCIAL CRISIS

Table of ContentsINTRODUCTION ..........................................................................................................................11. Key risks in financial services dealing with real life examples..............................................12. Numerical illustration how bank's return on equity can be improved....................................33. The process of Securitization including a diagram illustration...............................................44. The key features of Basel II including three pillars................................................................65. Role of the bank of England in banking crisis........................................................................76. Quantitative evaluation balance sheet management impact on profitability...........................87. Detailed description of bank run and impact its impact on Northern Rock betweenSeptember 2007...........................................................................................................................98. Internal and external reasons that caused the Northern Rock’s bank run in 2007 and its keyattributes......................................................................................................................................9CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................12

INTRODUCTION Financial crisis is considered as a situation indicates towards loss and declining stage offinancial position and nominal value. There were types of financial crisis happened in 19thcenturies and 20th century (Karanikolos and et. al., 2013). Financial crisis was associated with thebanking panics, recessions with the banking crisis. This report is overview of financial crises.Key financial risks, practical based bank's return on equity can be improved are defined in thiscontext. Basel II and role of Bank of England in order to overcome the financial crisis defined inthis report. Regulatory framework defined subject to credit market and operational work. Bankrun and the impact to the Northern Rock between September 2007 explained in this context.Both the internal and external reasons caused the Northern Rock's bank run defined in thiscontext. 1. Key risks in financial services dealing with real life examplesRisk which remain associated with the management and control of financial services areconsidered as financial risks. It is important to detect the financial risk to avoid financialuncertainties and risks (Shiller, 2012). Financial risk services help global economies in order toresolve international issues, fulfilling the requirements of a worldwide market, providing theprinciple of the risk management framework. It assist the global economies to deal with thefinancial challenges and financial risks. After facing the financial crisis five major financial riskindicators were classified by the risk financial services. There are major five factors need toconsidered by the financial and banking industries such as Conduct risk: it is initial requirement for every financial or banking industry to manageand mitigate conduct risk. This also remain at highest priority around the world with regulationactiveness and resources (Martin, 2011). It is centred the financial industries must behaveaccording to their financial feasibility. It is essential to conduct the risk and it is considered as aclear expectation firms and organisations should make over their own working definitionssubject to define the conduct risk. Conduct risk is remain the major reason of debate for financialexperts that which is the good estimation in terms of conducting risk with particular individual'sreasonable approach being another sharp practice.This also plays a conjunction role in at management level such as middle managers, highquality management information, back up by internal audit oversight and practically relevantwith the liability and responsibilities. 1

Person liability: It is considered as a practical reality with the changing trends andtheories (Peters and et. al., 2012). As per theoretical prospective a person can hold theaccountability of routine practice subject to personal liability which stay easier, fast to regulateaims and objectives of firms and also help in complaint behaviours. This is approach is basicallycentralised around senior individuals and used for key personnel to accounts in order to led to thevast financial crisis. Whilst previous process indicate towards regulators to enforce seniormanagers. It was considered as costly exercise subject to money and time. The UK has optedseveral decisions and steps towards changing the expectations and requirements for higher levelmanagements. There is a risk assessment done by the finance managers in respect of financialuncertainties. UK Prudential Regulation authority Designated investment firms are formed todeal with the financial risks.Compensation practices: these practices remain interrelated with both the conduct riskand personal liabilities (Erkens, Hung and Matos, 2012). It is seen that the practice remainassociated with the changes in reforms and regulators. It is becoming the growing sense subjectto compensation instigated with the helps of financial stability board. Banking conduct andculture which is a call for comprehensive and sustained reforms.As per the accumulation of G30 work showcase the downright depth and breadth of workto address the near universal flaws in banking culture. Reports do not present clear picturerelated to good and bad culture and propose future regulation to govern culture. Data protection: this is one of the blistery topic of debate subject to Data protectionunder the European General Data Protection Regulation. This is the main regulation which wasfirstly proposed by the European government subject to application of risk policies on residentialof European union. Financial firms need to ensure the financial risks and identify the needs ofclients. Regulations, policies, procedures and controls are made for those who are deemed to beresident in the European countries. Data protection is one of the major aspect which can not beavoided by the financial risk reforms and firms (Taylor, 2013). There are chances to loose thereputation and image by the lack of proper supervision and legislation. To protect the identityand data of clients to maintain integrity is one of the prime objective of this risk assessment.Regulatory fatigue: it indicates towards the continues sheer volume, range of changesand reforming financial services. It is important to avoid the factors remain associated with theimproper. There are some temporary changes done to repair the regulatory bodies, require,2

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