subprime crisis
DESCRIPTION
it about how sub prime crisis starts and what is current situationTRANSCRIPT
Presented By, Bulbul Sharma
Presentation Scheme
Meaning of Subprime Crisis Subprime Lending versus Prime Lending Road to Subprime Crisis Effects of Subprime Crisis Conclusion
What is Subprime Crisis? Borrower fails to repay his/her Subprime loans
Prime Lending Versus Subprime Lending
Issued to household with highly rated credit histories.
Issued to households with low incomes and assets, and with troubled credit histories. High Interest rate Called B-paper credits
Low interest rate
Called "A-paper" credits.
Road to Subprime CrisisNational Partners in Home Ownership,1994 Fall in Interest rate Rise in house price More Subprime lending
Write off as Bed Debts
Fails to pay
Reduce in demand and Fall in Houses price
Increase in Interest Rate
Effects of Subprime Crisis
On Banking Industry In
2008 the loss is estimated like 280 billion US Dollars. For example: UBS AG Bank has suffered $37.7 billion, Citibank $39.1 billion.
Contd..
Real Estate
At the end of 2007 home prices had fallen approximately 8% from their peak in 2006. Construction of houses dropped in the same period
Contd
Risk Preferences Structured
assets of all ratings grades are being shunned in favor of simpler cash securities. Example: Bear, Stearns collapse
For
Conclusion Currentlynew regulations is the best way to deal with the system, preventing banks to have risky operations will decrease the chance of having crisis in the future. FED should also extend its powers.