Impact of Global Financial Crisis on UK

LAW QUESTION
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INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Global financial crisis.................................................................................................................1
Impact of global financial crisis on UK......................................................................................4
UK response towards financial Crisis and its financial system..................................................5
Recent regulations of UK financial system.................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................11
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INTRODUCTION
Global financial crisis is a term which means shortage of funds across the globe due to
fluctuation in several factors that affects international finance department. However, financial
crisis of 2007-2008 is known as global financial crisis and almost large number of economists
said that it was a worst crisis since the Great depression of 1930s 1. Therefore, assignment is
going to highlight the major financial crisis which affects the whole world and its influence on
entire global platform. In order to cope up with financial issue, various international institutions
are coming up with new policies or ideas to control this situation. Along with this, regulatory
frameworks and legitimate bodies of UK have taken major steps by coming up with new legal
acts for supporting the nation. Hence, two new regulators are mainly outlined in the report which
replaced the existing financial services authority for stabilizing the UK condition.
MAIN BODY
Global financial crisis
Global financial crisis is denoted the time period where there was availability of
extreme stress in global financial markets and banking systems in almost mid of 2007 till early of
2009. Basically, it was caused due to the deregulation in financial industry which allows the
banks to get involved in hedge fund trading with derivates. After that, bank demanded more
mortgagees for supporting the profitable sale of that derivates. As a result, entire scenario creates
a breathtaking financial crisis which led to great recession. By the September, 2008 financial
crisis become more worsened as stock markets across the globe crashed as well as highly
volatile. As a result, confidence of customers also hit rock bottom due to which every individual
tightened their belts and lost their faith on marketplace 2.
From the sub-prime to downturn, five phases of most dangerous crisis almost hit the
entire globe economy since the Great depression which was found in these five dates such as; 9
august 2017, 15th September 2008, 2nd April 2009, 9th May 2010, 5th August, 2011. Initial
1 Helleiner, E., 2011. Understanding the 2007–2008 global financial crisis: Lessons for
scholars of international political economy. Annual Review of Political Science, 14,
pp.67-87.
2 Erkens, D.H., Hung, M. and Matos, P., 2012. Corporate governance in the 2007–2008
financial crisis: Evidence from financial institutions worldwide. Journal of Corporate
Finance, 18(2), pp.389-411.
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phase is on 9th August 2007 started with the seizure in entire banking system when Merril Lynch
trader Strenfors got a call which was change his life. On the other hand, French Bank BNP
Paribas was frozen $2.55 billion worth of finances citing an “evaporation of liquidity”. In this
day, almost entire world get changed and distributed after the news comes out about injected $
11.3 billion into financial markets by European central bank and US federal Reserved. After one
month from this incident, customers queued for acquiring their money out from Northern Rock
which was for the first time in the 150 years of this institution 3. It’s really a sparking issue
which is a great exposure for individual banks in which trust evaporated overnight because of
this; all the banks stopped doing business with each other.
According to the above graphical representation, it has been assessed that major reason
behind financial crisis was banks because they were created too much money in a fastest way.
All the time a bank offered a loan for creating a new money which shows in a financial crisis that
banks was get succeeded in created a huge sums of funds. By analysing the graph, it was clearly
showed that just in 7 years, banks was doubled the amount of money as well as debt in the
3 Larry Elliott, 2011 . [Online]. Available through<
https://www.theguardian.com/business/2011/aug/07/global-financial-crisis-key-stages.
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