US Financial Crisis: Effects on Global Banking


Code : ECC0007

Year :

Industry : Banking, Insurance and Financial Services

Region : Global

Teaching Note:Available

Structured Assignment : Available

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Abstract: This case, while giving US' role in pursuing free market philosophy both domestically as well as internationally also highlights how US banking institutions have become harbingers of 'Mega Banking' model. The case focuses on the role of global banks in increasing the wealth in the world markets. It brings out the role of these banks in the US Financial Crisis and cites the problems with the US financial system. In the light of US Financial Crisis (2008), what should be the alternate strategies? Does this crisis spell a doomsday for global banking superhouses? Wealth maximisation was the axiom that has been driving all the modern day corporations. To realise this ultimate dream, while some companies have simply invented new products and with that new industries, some other companies stuck to the age-old business models, but expanded to new segments. Banking falls into the latter category. Banks from the developed world, especially those from US, expanded their size and scope aided by globalisation and liberalisation. Sure, they have expanded their size and scope, and with that they also have increased their risk exposure. As evident from the US Financial Crisis, the so called global banks have become vulnerable to changes in any part of the globe.

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Pedagogical Objectives:

  • To explain the fallout of the subprime crisis into a global financial crisis.
  • To understand the involvements of global banks in the crisis and their changing facet with the crisis.
  • To examine the consequences of the crisis and the problems that it will unfold to global banks.
    Keywords : Financial Crisis, Subprime Mortgage Business, Mortgage Backed Securities (MBS), Credit Default Swaps (CDS),Collateral Debt Obligations (CDOs), Subprime Mortgage Crisis, US Treasury bonds, Fractional Reserve banking, Investment banks, Global Financial Order, UBS, Global Banks, Financial Innovation, Foreign Investments

    Contents :
    The Rise of Global Banking and its Exposure to US Financial Market
    The US Debt Market
    Subprime Balloons to US Financial Crisis
    The Crisis goes Global Nemesis of 'Global Financial Order'

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