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GB30403CURRENT GLOBAL FINANCIAL

CRISIS & ITS IMPLICATION ON IFI: THE CASE OF US REGION

ROGER FEDERER

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OBJECTIVE

To identify the performance of international financial institution.

To determine the causes of the global financial crisis in United States.

To identify the implications of global financial crisis in United States to the international financial institution.

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PERFORMANCE OF INTERNATIONAL FINANCIAL

INSTITUTION

Surveillance strategy Emerging market economies strategy Capacity building strategy Governance strategy

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CAUSES OF THE GLOBAL FINANCIAL CRISIS IN U.S

Dramatic change in the ability to create new lines of credit• Cheap credit crated more money in the system and

people wanted to spend that money

Greed• Thousands of people took out loans larger than they

could afford

Housing slump• Depressed housing prices caused further

complications

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DISCUSSION AND FINDINGS

Causes have been highlighted by various analysts.

• An interest-based and debt-driven financial system• Subprime mortgages and securitization• Monetary policy and low interest rates• Credit growth and predatory techniques by lenders• The complexity and mispricing of the risks of new

products• Liquidity, leveraging and the fear of contagion

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CONT…

• Regulatory and supervisory failures• Transparency and disclosure• The role of rating agencies• The effect of financial globalization

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DISCUSSION AND FINDINGS: IMPACTS TO THE FINANCIAL INSTITUTIONS

Northern Rock• Involve in home construction and mortgage lending

Bankruptcy of Lehman Brothers • the financial crisis entered an acute phase marked by

failures of prominent American and European banks and efforts by the American and European governments to rescue troubled financial institutions

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DISCUSSION AND FINDINGS: IMPLICATION TO THE U.S

ECONOMY

US had to bear the excess payment of expenses using the foreign loans

Declining in cost of household borrowing in the US

Huge losses in securities due to loss of investor confidence on global stock markets and a decline in credit availability

Effect to insurance companies

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Cont..

The expectation on short-term funding disruption could have minimal ratings implications for traditional and alternative asset managers

The effect of global crisis has make the relationship between US and China become international attention

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RECOMMENDATIONS

Regulating systematic risk Separating propriety trade Information transparency Creating a robust and resilient financial system Capital flow management Internationalization of currencies

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CONCLUSION

• Many factor such as subprime lending crisis, miss-pricing risk, under-pricing risk, become a reason for the global financial crisis in U.S

• Three steps to settle the global financial crisis:– establishing moral constraints on greed to maximize

profit, wealth and consumption– strengthening market discipline that will exercise a

restraint on leverage, excessive lending and derivatives

– reforming the system’s structure combine with prudential regulation and supervision to prevent crises,

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Thank You

Q & A