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Current Global Financial Crisis and Its Implications on International Financial Institutions: The Case in Malaysia ( Rafael Nadal ) Nor Akirah bt Ramli BG09110405 Hafizah bt Hanafi BG09110146 Mardhiawaty bt Malik BG09110254 Mas Suraeda bt Ghani BG09110162 Norhaini bt Masa BG09110021 Siti Ayu bt Kurio @ Drahman BG09110102

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Page 1: Rafael nadal (p.slide)

Current Global Financial Crisis and Its Implications on International Financial Institutions: The Case in

Malaysia

( Rafael Nadal )

Nor Akirah bt Ramli BG09110405

Hafizah bt Hanafi BG09110146Hafizah bt Hanafi BG09110146

Mardhiawaty bt Malik BG09110254

Mas Suraeda bt Ghani BG09110162

Norhaini bt Masa BG09110021

Siti Ayu bt Kurio @ Drahman BG09110102

Page 2: Rafael nadal (p.slide)

Outline

� Introduction

�Objective

�Impact on Malaysia�Impact on Malaysia

�Steps taken by Malaysia

�Effectiveness of steps

�Conclusion

Page 3: Rafael nadal (p.slide)

Introduction

• Global - a planet, the world, the world of the whole earth, is not

limited or regional in scope.

• Financial crisis - situations in which some financial

institutions or assets suddenly lose a large part of their value

• International financial institutions (IFI) -public banks and

other credit institutions “owned” by more than one country

Page 4: Rafael nadal (p.slide)

• There are other factors that caused global financial crisis

including free market ideology, etc.

• This crisis spread to Malaysia via two-way :

1. Channel of trade

2. Channel of finance2. Channel of finance

• IFI and Malaysia have each experienced a number of

impacts. Several major financial institutions taken over by

other financial institutions.

Page 5: Rafael nadal (p.slide)

• Effects of Global financial crisis to IFI:

� banks, investment houses, and insurance companies have either

announced bankruptcy

� banks in the developing economies suffer contractions in credit lines

and reduced financial flows due to the failure of leading financial

institutions. Eg: IMFinstitutions. Eg: IMF

� five of America’s largest investment banks have been reborn as

commercial banks

� UBS and Citigroup, have announced huge losses.

� collapse of the banking system in Iceland, the fall of Fortis which a

Belgo-Dutch Bank

Page 6: Rafael nadal (p.slide)

• almost all of the financial institutions in the United States and other

parts of the world including international level such as Iceland,

Hungary, Country Ukraine, and other Easter European and Baltic

endured heavy losses from their collateralized debt obligations

(CDO’s), credit default swaps (CDS’s), and other financial assets

Page 7: Rafael nadal (p.slide)

Objectives

1. To determine the impact of global financial crisis in

Malaysia

2. To examine the steps taken by Malaysia in order to2. To examine the steps taken by Malaysia in order to

overcome the global financial crisis

3. To determine the effectiveness of the steps that has been

taken by Malaysia

Page 8: Rafael nadal (p.slide)

Impacts of Global Financial Crisis to Malaysia

a) GDP growth rate

Page 9: Rafael nadal (p.slide)

Cont…. b) Malaysia’s export

� reduction in the values of a continuous drop in Exports, not only

AFFECTED industrial production in export-oriented sectors, but also

indirectly from the making and the lack of domestic demand and other

services.

c) Imports of intermediate goods

d) Impact on investment

� a surge in bank outflows have a negative impact on other investment net

outflows of Recorded 11 billion lower than the previous year with a net

outflow of RM46.9 billion.

e) Impact on employment

f) Impact on inflation rate

Page 10: Rafael nadal (p.slide)

Steps taken by Malaysia

Malaysia peg the value of money so do not experience

continued fall in an uncertain world market

Malaysian government has freeze the assets of foreign

investors in Malaysia Ringgit

Government refused to request financial assistance from the IMF

funds

Transformation including the rationalization of the existing

institutions, the establishment of new institutions and

introduction of foreign competition

Page 11: Rafael nadal (p.slide)

Cont….

Consolidate the banking sector through mergers and acquisitions

and increased capitalization

Reduce reliance on the existing financial market system and see this crisis as an opportunity to

introduce Islamic financial system

Trade relations with China Providing own stimulus package

Page 12: Rafael nadal (p.slide)

Effectiveness of steps

• To maintain exchange rate stability as a policy

to reduce the policy option.

• Additional fluctuations driven by procyclical

fiscal policy has been found to weaken the long

term growth.

Expansionary fiscal policy

term growth.

• Can be adopted as a general policy response

• To accept the fact that the adjustment is not

inevitable and is intended to reduce pain and

promote the orderly adjustment.

Stabilization and stimulus

Page 13: Rafael nadal (p.slide)

Cont….

• Need to be timely, large, lasting,

diversified, contingent, collective and

sustainable to reduce probability another

“Great Depression”

Optimal fiscal

package

“Great Depression”

• Occurs because the stimulus package failed to

address critical structural weaknesses

mentioned earlier.

• Stimulus private spending to replace public

spending.

Fiscal stimulus

package

Page 14: Rafael nadal (p.slide)

Conclusion

Global financial crisis did not have a very

significant impact on Malaysia

This is shown by the quick recovery that Malaysia has

displayed, whereby the Malaysian economy has improved

compared to when the global financial crisis initially hit

MalaysiaMalaysia

Early transformation in the Malaysian financial and economic

from the current global financial crisis

Early transformation in the Malaysian financial and economic

sectors following the Asian financial crisis has also helped to

better prepare Malaysia in absorbing the shocks that resulted

from the current global financial crisis

Overall, the steps taken by Malaysia have served the country well, as

its economy has shown positive signs in recovering from the crisis as

early as in year 2010

Page 15: Rafael nadal (p.slide)