THE FINANCIAL CRISIS AND THE BANKS' ROLE

By Nicoletta Cangiano

In my paper I want to analyze the state of health of the banking system,and to describe the 2008 financial crisis, an event that changed the history course for the Western countries' economies.
The global financial crisis was a crisis that had the banks as its epicenter.
The global financial system ended up in collapse due to the excessive use of complex and speculative instruments, defined as "derivatives" and the high volume of loans granted by banks even to those who would not be able to repay them in the future.

• Language: English
• Publisher: Lulu.com
• Release date: Aug 20, 2020
• ISBN: 9781716644122

Book preview

THE FINANCIAL CRISIS AND THE BANKS' ROLE

Nicoletta Cangiano

THE FINANCIAL CRISIS AND THE BANKS’ ROLE.

Copyright © 2020 Nicoletta Cangiano.

All rights reserved.

Ebook ISBN 978-1-71664-412-2

Pubblished by Lulu.com

INDEX

Preface .............................................................................................................................. 5

Chapter I: THE FINANCIAL CRISIS……………………………………………….. 6

1.1 How the global financial crisis happened.................................................................... 7

1.2 The Asset backed security’s origins.............................................................................8

1.3 The microeconomic causes of the financial crisis…………………………………...10

1.4 The Abs rating problem……………………………………………………………..14

1.5 The macroeconomic causes of the financial crisis…………………………………..15

Chapter II: THE BANKS’ ROLE ……………………………………………………18

2.1 How the banking crisis hit Europe… …………………………… .. ..…………… ..19

2.2 From too big to fail to bail-in: the no-bail-out clause ........……………………..…..20

2.3 The new Legislaton ………………………………………… .. ………..………… .21

2.4 The bail-in effects.………………………………. ………………...………. …… 23

2.4.2 Towards the Banking Union………………………………………………………24

2.4.3 Directive 2014/59/EU: the European Banking Union…………………………….25

2.4.4 Preventive measures………………………………………………………………30

Conclusions …………………………………………………………...………………..31

Biography ……………………………………………… ...............................................32

PREFACE

To analyze the state of health of the world banking system, it occurs to start from the 2008 financial crisis.

An event that changed the history course for the Western countries' economies.

The global financial crisis was a crisis that had the banks as its epicenter.

The global financial system ended up in collapse due to the excessive use of complex and speculative instruments, defined as derivatives and the high volume of loans granted by banks even to those who would not be able to repay them in the future.

In the global financial crisis, the derivatives have been identified in the so-called subprime mortgages, used, in their physiological use, by creditors for the house purchase and have also been granted by the banks to families without income or in any case without real guarantees to justification the credit disbursed, thus highlighting its pathological use. In Italy, the effects of the financial crisis were less strong, since our banks have always had a less speculative character.

The fear of possible bank failures and even of a possible State default, has led to a significant increase in the interest rates that the State and the credit institutions paid on the market, and the latter, in turn, to protect themselves have downloaded these costs on their customers.

Loans to households and businesses have become more onerous and the lending mechanism to the real economy has stalled, giving rise to a credit crunch.

In an economy like the Italian one, which is based on bank credit, this was undoubtedly one of the factors that contributed to fuel a very serious recession, characterized by the collapse of GDP, industrial production and numerous bankruptcies.

The world