imapct of financial crisis and role of financial institutions in this crisis

Created by: RANJITH KUMAR.C Financial crisis 2008

CAN ANY ONE KNOWS WHAT IS THE PROFIT OF SBI FOR THE FINANCIAL YEAR 2007-08 ? ,[object Object],[object Object]

Bank ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: The Economist: Making Sense of Modern Economy

Investment Banks ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: The Economist: Making Sense of Modern Economy

Insurance companies ,[object Object],[object Object],[object Object],[object Object],[object Object]

Mortgage Broker ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: Wikipedia

Sub-prime mortgage – What’s that? ,[object Object],[object Object],[object Object],[object Object],[object Object],Source: Wikipedia

Details : Private Sub-prime mortgage process 1. Brokers identify borrowers 2. Originator and broker identify a loan for borrower after looking at his credit rating 3. Formal application for loan by borrower 4. Originator transfers the loan to the subsidiary of an investment banking firm ( Seller) 5. Seller(Investment bank) collects a pool of loans and call it as SPE/SIV/SPV. Off balance sheet instrument 6. SPV can be a corporation, partnership or limited liability company. Most often a Trust. It has nothing else except mortgage loans 7. Underwriter purchases all the securities (derivative income streams) 8. In designing SPV and its tranches underwriter works with credit rating agencies 9. Underwriter then sells the securities to the investors 10. High rated tranches might be guaranteed by a 3rd party insurance company 11. Seller also arranges to sell the rights to service the loan pool to a company or sometimes Originator takes these rights 12. MERS – document custodian. Company to keep track of mountains of paper work on loans in the pool. At National level. Source : Subprime Mortgage Market Turmoil , testimony by Christopher L. Peterson

Good days turn bad. Crisis at the door (mid 2006 onwards): ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

How Sub prime became Global Financial Crisis? ,[object Object],[object Object],[object Object],[object Object],Source: Financial Times , http://www.ft.com/cms/s/0/a09f751e-6187-11dd-af94-000077b07658,dwp_uuid=698e638e-e39a-11dc-8799-0000779fd2ac.html In billion US $ How could problems with sub prime mortgages, being such a small sector of global financial markets, provoke such dislocation?

Top 10 Largest Bank Failures Sept. 25 failure of Washington Mutual was bar far the largest in US history. Sold to JP Morgan Chase by govt. for $1.9B plus WaMu’s loans and deposits Resurgent bank failures (13 in 2008 as of Oct. 12) are symptomatic of weakness in the financial system. FDIC says many more may fail Failure of Indy Mac was the 4 th largest in history

Sub prime losses by Big Banks Worldwide :US$ 586.2 billion and still counting Source: Financial Times

Stakes Taken by Federal Government in 9 Large US Banks ,[object Object],[object Object],[object Object]

Investments devalued across the Globe Source: BBC News, http://news.bbc.co.uk/2/hi/talking_point/7644574.stm

Sub prime impact across globe Source: Financial Times

Impact of Financial crisis-felt across the globe Source: Reuters, http://www.reuters.com/news/globalcoverage/creditcrisis

Distribution of $700 Billion in Funds Under Emergency Economic Stabilization Act of 2008 ,[object Object],[object Object],[object Object]

It is the right time to buy a house in U.S rather than buying a house in Hyderabad. Thank ”u”

imapct of financial crisis and role of financial institutions in this crisis

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