Banking In Emerging Markets Research Paper - 2750 Words

Banking In Emerging Markets in the Aftermath of Global Financial Crisis (Research Paper Sample) Content: Banking In Emerging Markets in the Aftermath of Global Financial CrisisName:Course:Tutor:Date:Paper outlineI.SynopsisII.IntroductionIII.The quality of central bank supervision and support during GFCIV.How Global financial crisis was managedV.Bank lending and non-performing assetsVI.Bank Structure à ¢Ã¢â€š ¬ ownershipVII.Bank performance in emerging marketsVIII.Rating of banks in emerging economiesIX.How banks in emerging market fared as compared to western banks during and after GFCXI.Effects of GFC on risks managementXII.Vulnerability of banks to crisisXIII.Reference Listà ¢Ã¢â€š ¬Ã†â€™SynopsisThis essay discusses the Global Financial Crisis (GFC) in emerging markets in the world. The essay utilizes several references that discuss the causes of GFC and the impacts on the economies of the emerging markets. The essay explores the differences in financial sectors between the emerging markets and the developed world with a view of ascertaining the differences in the de gree of the impacts of GFC on both economies. The essay studies why emerging markets are more prone to GFC as compared to developed economies. The key issues discussed by the essay are the severity of GFC, how GFC was managed, bank ownership structure, and the regulatory environment in the financial sectors of emerging markets.Banking in Emerging Markets in the Aftermath of Global Financial CrisisIntroductionThe background of the causes of global financial crisis (GFC) dates bank in mid 2007 in the United States of America. The collapse of subprime assets in the summer of 2007 triggered by liquidity crisis in the banking sector in the United States (Kapsis, 2012) was the origin of the most recent GFC. Lending was restricted due the exposure of the financial sector GFC due to the collapse of the subprime market. Banks that depended on interbank lending were worse hit by the crisis leading to solvency problems. According to Kapsis, the most hit banks, Northern Rock, and Bradford Bing ley were crippled by the insolvency problem in the early stages of the crisis. The daily operations of the banks were slowly shuttered by the financial menace that made the central banks react. The central banks intervened through offering liquidity support to the banks that were worse hit by liquidity problem. Furthermore, the government and other regulators intervened by brokering mergers of insolvent banks with banks which were more stable (Kapsis, 2012).Though the intervention by the government and the central bank seemed to have had significant success, the impact of the crisis was far from over. The subprime market multi-linkages among the banks spread the crisis further. According to Kapsis, the deeper effects of the crisis manifested further when Lehman Brothers was hit by the crisis in the year 2008. The crisis spread to various regions in the world when investor started to liquidate their positions as more banks in the United States and Europe experience insolvency threa ts (Kapsis, 2012).The world economy was in jeopardy due to these financial crises. Banks were reluctant to lend companies and consumer dues the turmoil. This pushed so many countries into economic recession. The United States and the European countries fought hard to contain the crisis that threatened to plunge the whole world into economic depression like the one witnessed after the First World War in early 1930s. Though the crisis was significantly contained its effects were far reaching consequences on the world emerging market economies. Moreover, the crisis still re-occurred in 2010 in Europe and threatens to spread to worldwide (Kapsis, 2012).The quality of central bank supervision and support during GFCAccording to Vies (2006), the structure supervision of the banking sector tends to be weak. Financial supervisors in emerging market lack legal protection exposing them to demands from lobbies. Furthermore, the regulatory authorities lack enough resources hence exposing them t o influence from government or foreign bodies that fund them. Banks in emerging markets are less developed exposing them to government inflationary debt because of dependence on government bonds (Vies, 2006). The government regulations in this scenario, weakness the financial sector in emerging markets (Vies, 2006). The structure of banking in emerging markets is further weakened by lack transparency in the regulation and supervision.The central banks as a financial sector supervisor played a major role in the mitigation of the financial crisis in emerging economies. Though the primary role of central banks is issuing currencies in the economy, management of external and internal currencies, credit regulation, and acting as a fiscal agent, it went beyond its mandate during the financial crisis to manage it effectively. During the GFC, the vulnerability of the banking system in emerging economies rendered the quality of supervision and regulation by the central banks (Vies, 2006). T his caused information and system asymmetry in the economy thereby catalyzing the crisis. According to Vies, to enhance quality regulation and supervision of the financial sector in an emergency there is a need to undertake rigorous examination of bank books. This enables central banks to draw up policies to maintain stability in the financial sector (Vies, 2006).How Global financial crisis was managedThe global financial crisis caused panic across the world, and this made government and financial regulators take a number of measures to manage the situation. Some of the major measures that were taken by governments and regulators included the use of deposit insurance, bailouts, and bankruptcies. Some countries especially in the emerging economies also opted to use foreign reserves to manage the situation since it was believed that the volatility in the foreign could further catalyze the crisis.Deposit insurance was implemented in many countries to protect bank deposits from losses d ue to the inability of the banks to pay their debts (Turner, 2006). This acted as a safety net by the central banks to ensure financial stability of several banks that were indebted. The crisis created anxiety among depositors, and this prompted some authorities to increase the coverage of the insurance of the deposits. Deposit insurance adoption helped to prevent the debt of the financial institution from being transmitted to depositors (Turner, 2006).Bailouts were also used to salvage banks that were greatly affected by solvency and liquidity problems. The United States government passed a bill in the year 2008 that allowed the government to bailout banks that were on the brink of collapse due to the financial crisis (McAfee Johnson, 2010). In Europe, the European Union committed to guaranteeing bank financing by spending $ 1.8 trillion and purchased banks shares to prevent collapse. The United States government further agreed to purchase equity ownership in major banks and purch ased less of the toxic mortgage debts (McAfee Johnson, 2010).Bank lending and non-performing assetsThe recent financial affected banking sectors across the world. However, the impact of the crisis was unevenly felt across different banking sectors in the world. Financial crisis has an effect on credit growth thereby causing standstill and drop in the growth of loans and assets (Middle East Economic Digest, 2010).The banking sector usually experience liquidity problems during GFC meaning that banks cannot afford to offer credit to companies during this period because of the probability of loan defaulting. It is generally acknowledged that companies are usually in dire need of credit during GFC.Non-performing assets, according to Yang, can be defined as accounts are assets or accounts that are held by borrowers that the bank classifies as doubtful. During GFC, many companies become bankrupts due to liquidity and solvency problems. This translates to an increase in bank non-performing assets because of the high levels of defaulting caused by the crunch of companies affected by the GFC (Middle East Economic Digest, 2010).Bank Structure à ¢Ã¢â€š ¬ ownershipTypes of banks in emerging markets are classified as government owned, private domestic, and foreign. According to Mian (2003), these banking structures differ significantly from one another. Majority government banks are characterized by lack poor cash-flows. Private domestic banks on the other hand have high cash-flows incentives, and clear separation from the ownership. Mian points out those foreign banks are only differentiated from private domestic bank by the organizational structure of the top management. These types of banks are equally distributed across the emerging markets across the world.Many emerging market economies have banks that are either directly owned by the government or indirectly controlled by the government. It is due to this reason that the governments play a major role in the regulati on of financial sector in many emerging economies. In his analysis of the political influence on bank ownership in emerging countries, Dinc finds out that government ownership of banks is very common in emerging markets. It is further noted that the government holds large stakes in banks that it controls (Dinc, 2005). Government owned banks tend to bigger and older than the private domestic and foreign banks (Mian, 2003).Private domestic banks are more aggressive in terms of lending as compared to government and foreign banks. Private domestic banks in developing economies hold less of liquid assets and more in the form of loans as compared to foreign banks. Furthermore, private domestic banks give out loan at a higher rate than the foreign counterparts (Mian, 2003)Foreign banks have significantly gained way into the emerging market for a couple of decades ... Banking In Emerging Markets Research Paper - 2750 Words Banking In Emerging Markets in the Aftermath of Global Financial Crisis (Research Paper Sample) Content: Banking In Emerging Markets in the Aftermath of Global Financial CrisisName:Course:Tutor:Date:Paper outlineI.SynopsisII.IntroductionIII.The quality of central bank supervision and support during GFCIV.How Global financial crisis was managedV.Bank lending and non-performing assetsVI.Bank Structure à ¢Ã¢â€š ¬ ownershipVII.Bank performance in emerging marketsVIII.Rating of banks in emerging economiesIX.How banks in emerging market fared as compared to western banks during and after GFCXI.Effects of GFC on risks managementXII.Vulnerability of banks to crisisXIII.Reference Listà ¢Ã¢â€š ¬Ã†â€™SynopsisThis essay discusses the Global Financial Crisis (GFC) in emerging markets in the world. The essay utilizes several references that discuss the causes of GFC and the impacts on the economies of the emerging markets. The essay explores the differences in financial sectors between the emerging markets and the developed world with a view of ascertaining the differences in the de gree of the impacts of GFC on both economies. The essay studies why emerging markets are more prone to GFC as compared to developed economies. The key issues discussed by the essay are the severity of GFC, how GFC was managed, bank ownership structure, and the regulatory environment in the financial sectors of emerging markets.Banking in Emerging Markets in the Aftermath of Global Financial CrisisIntroductionThe background of the causes of global financial crisis (GFC) dates bank in mid 2007 in the United States of America. The collapse of subprime assets in the summer of 2007 triggered by liquidity crisis in the banking sector in the United States (Kapsis, 2012) was the origin of the most recent GFC. Lending was restricted due the exposure of the financial sector GFC due to the collapse of the subprime market. Banks that depended on interbank lending were worse hit by the crisis leading to solvency problems. According to Kapsis, the most hit banks, Northern Rock, and Bradford Bing ley were crippled by the insolvency problem in the early stages of the crisis. The daily operations of the banks were slowly shuttered by the financial menace that made the central banks react. The central banks intervened through offering liquidity support to the banks that were worse hit by liquidity problem. Furthermore, the government and other regulators intervened by brokering mergers of insolvent banks with banks which were more stable (Kapsis, 2012).Though the intervention by the government and the central bank seemed to have had significant success, the impact of the crisis was far from over. The subprime market multi-linkages among the banks spread the crisis further. According to Kapsis, the deeper effects of the crisis manifested further when Lehman Brothers was hit by the crisis in the year 2008. The crisis spread to various regions in the world when investor started to liquidate their positions as more banks in the United States and Europe experience insolvency threa ts (Kapsis, 2012).The world economy was in jeopardy due to these financial crises. Banks were reluctant to lend companies and consumer dues the turmoil. This pushed so many countries into economic recession. The United States and the European countries fought hard to contain the crisis that threatened to plunge the whole world into economic depression like the one witnessed after the First World War in early 1930s. Though the crisis was significantly contained its effects were far reaching consequences on the world emerging market economies. Moreover, the crisis still re-occurred in 2010 in Europe and threatens to spread to worldwide (Kapsis, 2012).The quality of central bank supervision and support during GFCAccording to Vies (2006), the structure supervision of the banking sector tends to be weak. Financial supervisors in emerging market lack legal protection exposing them to demands from lobbies. Furthermore, the regulatory authorities lack enough resources hence exposing them t o influence from government or foreign bodies that fund them. Banks in emerging markets are less developed exposing them to government inflationary debt because of dependence on government bonds (Vies, 2006). The government regulations in this scenario, weakness the financial sector in emerging markets (Vies, 2006). The structure of banking in emerging markets is further weakened by lack transparency in the regulation and supervision.The central banks as a financial sector supervisor played a major role in the mitigation of the financial crisis in emerging economies. Though the primary role of central banks is issuing currencies in the economy, management of external and internal currencies, credit regulation, and acting as a fiscal agent, it went beyond its mandate during the financial crisis to manage it effectively. During the GFC, the vulnerability of the banking system in emerging economies rendered the quality of supervision and regulation by the central banks (Vies, 2006). T his caused information and system asymmetry in the economy thereby catalyzing the crisis. According to Vies, to enhance quality regulation and supervision of the financial sector in an emergency there is a need to undertake rigorous examination of bank books. This enables central banks to draw up policies to maintain stability in the financial sector (Vies, 2006).How Global financial crisis was managedThe global financial crisis caused panic across the world, and this made government and financial regulators take a number of measures to manage the situation. Some of the major measures that were taken by governments and regulators included the use of deposit insurance, bailouts, and bankruptcies. Some countries especially in the emerging economies also opted to use foreign reserves to manage the situation since it was believed that the volatility in the foreign could further catalyze the crisis.Deposit insurance was implemented in many countries to protect bank deposits from losses d ue to the inability of the banks to pay their debts (Turner, 2006). This acted as a safety net by the central banks to ensure financial stability of several banks that were indebted. The crisis created anxiety among depositors, and this prompted some authorities to increase the coverage of the insurance of the deposits. Deposit insurance adoption helped to prevent the debt of the financial institution from being transmitted to depositors (Turner, 2006).Bailouts were also used to salvage banks that were greatly affected by solvency and liquidity problems. The United States government passed a bill in the year 2008 that allowed the government to bailout banks that were on the brink of collapse due to the financial crisis (McAfee Johnson, 2010). In Europe, the European Union committed to guaranteeing bank financing by spending $ 1.8 trillion and purchased banks shares to prevent collapse. The United States government further agreed to purchase equity ownership in major banks and purch ased less of the toxic mortgage debts (McAfee Johnson, 2010).Bank lending and non-performing assetsThe recent financial affected banking sectors across the world. However, the impact of the crisis was unevenly felt across different banking sectors in the world. Financial crisis has an effect on credit growth thereby causing standstill and drop in the growth of loans and assets (Middle East Economic Digest, 2010).The banking sector usually experience liquidity problems during GFC meaning that banks cannot afford to offer credit to companies during this period because of the probability of loan defaulting. It is generally acknowledged that companies are usually in dire need of credit during GFC.Non-performing assets, according to Yang, can be defined as accounts are assets or accounts that are held by borrowers that the bank classifies as doubtful. During GFC, many companies become bankrupts due to liquidity and solvency problems. This translates to an increase in bank non-performing assets because of the high levels of defaulting caused by the crunch of companies affected by the GFC (Middle East Economic Digest, 2010).Bank Structure à ¢Ã¢â€š ¬ ownershipTypes of banks in emerging markets are classified as government owned, private domestic, and foreign. According to Mian (2003), these banking structures differ significantly from one another. Majority government banks are characterized by lack poor cash-flows. Private domestic banks on the other hand have high cash-flows incentives, and clear separation from the ownership. Mian points out those foreign banks are only differentiated from private domestic bank by the organizational structure of the top management. These types of banks are equally distributed across the emerging markets across the world.Many emerging market economies have banks that are either directly owned by the government or indirectly controlled by the government. It is due to this reason that the governments play a major role in the regulati on of financial sector in many emerging economies. In his analysis of the political influence on bank ownership in emerging countries, Dinc finds out that government ownership of banks is very common in emerging markets. It is further noted that the government holds large stakes in banks that it controls (Dinc, 2005). Government owned banks tend to bigger and older than the private domestic and foreign banks (Mian, 2003).Private domestic banks are more aggressive in terms of lending as compared to government and foreign banks. Private domestic banks in developing economies hold less of liquid assets and more in the form of loans as compared to foreign banks. Furthermore, private domestic banks give out loan at a higher rate than the foreign counterparts (Mian, 2003)Foreign banks have significantly gained way into the emerging market for a couple of decades ...

Contract Laws Essay - 1100 Words

Contract Laws (Research Paper Sample) Content: Assignment 3Assignment Task:Write up a simple case of a contract that is void because it is entered into under duress (4 marks). Write up a simple unilateral contract where the offeror reneges on a promise (6 marks). What does the offeree do in response to the offerors refusal to do as he promises in the contract (3 marks)?Contract lawsNameDateCourseQuestion 1 In terms of entering a contract, duress involves threatening, use of violence or constrain for the purposes of making someone sign a contract. In most cases, illegitimate pressure is usually applied to the weaker party for the purposes of forcing them to enter into a contract. The common laws play an essential role in determining the concepts of the contract laws. When parties are entering into a contract, duress is held to have taken place where an actual threat or violence has occurred. An example is where one party uses threats or violence either directly or indirectly to force the party to enter into the contract. In such a scenario, the contract is considered void. However, the party must prove that violence or threats contributed to their signing of the contract. Forcing a party to enter into a contract through threats and violence amounts to their deprivation of the free will to act. Question 2 In a unilateral contract, the offeror has to perform an act which indicates that he or she is in agreement with the bargain among the parties. Perfuming an act is also required during the process in order for the contract to take place. The acceptance occurs once the act that the offeror has been requested to perform has been embarked on. Once the offeree has performed the act, the unilateral contract takes effect and any contradiction by the offeror amounts to the renegation of the unilateral contract. In the case of  HYPERLINK "/cases/daulia.html" \t "_blank" Daulia Ltd v Four Millbank, an issue had arise on whether or not the offer may be revoked if the act that had been agreed up on has started but it has not been completed. The court ruled that once the act has been embarked upon, an acceptance has occurred which leads to the unilateral contract. This means that withdrawing the offer once the offeree has started the act amounts to the renegation of the unilateral contract. It is also important to note that the renegation of the unilateral agreement may lead to the legal issues and civil compensations may arise. On the other hand, the renegation of unilateral contract also occurs when an offeree performs the required and decides to withdraw upon the completion of the act. In the case of Mobil Oil Australia v Wellcome International, the issues of revoking a contact also arose. Mobil oil Australia had promised the dealers that any dealer who performed at a set level for 6 years would be given a franchise for a further 9 years free of charge. However, Mobil later revoked the scheme despite the performance of several delars. The trial judge held that onc e the offeree has embarked on the performance, the offer cannot be revoked. The full court however disagreed with the trial judge based on the fact that there is no universal proposition that the offeror is not at liberty to revoke the offer once the offeree have embarked on the performance. The action of the company still amounts to the renegation of the unilateral contract. The renegation of the promise has a negative impact to the parties concerned as it may lead to financial losses and it may also lead to the court battles between the parties concerned. The offer may be revoked on special circumstances with the consultations of both parties. In some situation the offeror may refuse do as promised in the contract with the offeree. While making an offer, it is important to note that it is only based on the promises and not form is required during the process. This means that the process is entirely dependant on the goodwill of both parties. The offeree has the option of reje cting the offer through an outright refusal or making a counter offer incase the offeror refuses to abide by the promises made. However, incase of rejecting the offer, proper communication must be used to ensure that the offeror... Contract Laws Essay - 1100 Words Contract Laws (Research Paper Sample) Content: Assignment 3Assignment Task:Write up a simple case of a contract that is void because it is entered into under duress (4 marks). Write up a simple unilateral contract where the offeror reneges on a promise (6 marks). What does the offeree do in response to the offerors refusal to do as he promises in the contract (3 marks)?Contract lawsNameDateCourseQuestion 1 In terms of entering a contract, duress involves threatening, use of violence or constrain for the purposes of making someone sign a contract. In most cases, illegitimate pressure is usually applied to the weaker party for the purposes of forcing them to enter into a contract. The common laws play an essential role in determining the concepts of the contract laws. When parties are entering into a contract, duress is held to have taken place where an actual threat or violence has occurred. An example is where one party uses threats or violence either directly or indirectly to force the party to enter into the contract. In such a scenario, the contract is considered void. However, the party must prove that violence or threats contributed to their signing of the contract. Forcing a party to enter into a contract through threats and violence amounts to their deprivation of the free will to act. Question 2 In a unilateral contract, the offeror has to perform an act which indicates that he or she is in agreement with the bargain among the parties. Perfuming an act is also required during the process in order for the contract to take place. The acceptance occurs once the act that the offeror has been requested to perform has been embarked on. Once the offeree has performed the act, the unilateral contract takes effect and any contradiction by the offeror amounts to the renegation of the unilateral contract. In the case of  HYPERLINK "/cases/daulia.html" \t "_blank" Daulia Ltd v Four Millbank, an issue had arise on whether or not the offer may be revoked if the act that had been agreed up on has started but it has not been completed. The court ruled that once the act has been embarked upon, an acceptance has occurred which leads to the unilateral contract. This means that withdrawing the offer once the offeree has started the act amounts to the renegation of the unilateral contract. It is also important to note that the renegation of the unilateral agreement may lead to the legal issues and civil compensations may arise. On the other hand, the renegation of unilateral contract also occurs when an offeree performs the required and decides to withdraw upon the completion of the act. In the case of Mobil Oil Australia v Wellcome International, the issues of revoking a contact also arose. Mobil oil Australia had promised the dealers that any dealer who performed at a set level for 6 years would be given a franchise for a further 9 years free of charge. However, Mobil later revoked the scheme despite the performance of several delars. The trial judge held that onc e the offeree has embarked on the performance, the offer cannot be revoked. The full court however disagreed with the trial judge based on the fact that there is no universal proposition that the offeror is not at liberty to revoke the offer once the offeree have embarked on the performance. The action of the company still amounts to the renegation of the unilateral contract. The renegation of the promise has a negative impact to the parties concerned as it may lead to financial losses and it may also lead to the court battles between the parties concerned. The offer may be revoked on special circumstances with the consultations of both parties. In some situation the offeror may refuse do as promised in the contract with the offeree. While making an offer, it is important to note that it is only based on the promises and not form is required during the process. This means that the process is entirely dependant on the goodwill of both parties. The offeree has the option of reje cting the offer through an outright refusal or making a counter offer incase the offeror refuses to abide by the promises made. However, incase of rejecting the offer, proper communication must be used to ensure that the offeror...