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Abstract
How did the US financial crisis snowball into USD 15 trillion global losses? This book offers a clear synthesis and original analysis of the various factors that led to the financial crisis of 2007-2010 - namely, an asset price bubble and excessive leverage. The focus is on the ingredients of and dynamics within the international financial system, and as such is the most comprehensive publication in scope to date in terms of market, country and instrument coverage. In addition to its thorough dissection of the causes and consequences of the most calamitous financial crisis in the past seventy years, the author also debates 'the way forward', including regulatory challenges, proposed changes and critique, and early warning systems.
How did the US financial crisis snowball into USD 15 trillion global losses? This book offers a clear synthesis and original analysis of the various factors that led to the financial crisis of 2007-2010 - namely, an asset price bubble and excessive leverage. The focus is on the ingredients of and dynamics within the international financial system, and as such is the most comprehensive publication in scope to date in terms of market, country and instrument coverage. In addition to its thorough dissection of the causes and consequences of the most calamitous financial crisis in the past seventy years, the author also debates 'the way forward', including regulatory challenges, proposed changes and critique, and early warning systems.
The objective of this reader is to provide a holistic summary of the financial crisis, and bring to light a new perspective on each of the issues, while simultaneously providing a thorough platform for those wishing to research any of the sub-topics independently. It ultimately discusses the lessons to be learned from the recent crisis, and questions whether the global financial system is capable of learning them. Written in a clear explanatory prose and featuring a wealth of quantitative data and qualitative analysis, this reader is accessible to the beginner, intermediate and advanced student.
'An holistic summary of the financial crisis... [using] case studies, quantitative data and qualitative analysis to bring clarity to the events surrounding the crisis.' —Cass Business School, City University London
Nashwa Saleh is currently a doctoral researcher at Cass Business School. She holds an MSc Finance (2002) from London Business School, and a BA (Cum Laude) in Business Administration from the American University in Cairo (AUC). She is a CFA Chartholder and member of the UKSIP since 2001.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Front Matter | i | ||
| Half Title | i | ||
| Title | iii | ||
| Copyright | iv | ||
| Table of Contents | v | ||
| List of Figures | ix | ||
| Acknowledgements and Disclaimer | xi | ||
| Preface | xiii | ||
| List of Acronyms | xv | ||
| Chapter 1: THE CRISIS AND THE TOO BIG TO FRAME PROBLEM: THE BIG PICTURE FIRST | 1 | ||
| 1.1 The Evolution of the Global Financial Sector Structure Pre-Crisis and Systemic Hot Spots | 2 | ||
| 1.2 Weak Capitalization, Excessive Leverage and Skewed Funding Structures | 3 | ||
| 1.3 Global Imbalances: Systemic Significance of the US Too High | 4 | ||
| 14 Crisis Unravelling, Key Events and Turning Points | 4 | ||
| 1.5 Systemic and Institutional Crisis Cost | 6 | ||
| 1.6 Outlook for Write-Downs, Provisioning, Capital Raisings and Refinancing Needs | 7 | ||
| 1.7 Outlook fot the Real Economy | 7 | ||
| 1.8 Regulatory Regimes and Response to the Crisis | 10 | ||
| 1.9 The Ballooning Fiscal Overhang as a Consequence of Necessary Policy Action | 12 | ||
| 1.10 Regulatory Challenges, Proposed Changes and Critique | 12 | ||
| 1.11 Banking Sectors and Individual Institutions are Too Big to: Fail, Regulate, Audit, Manage and Evaluate, in Short Literally Too Big to FRAME | 12 | ||
| 1.12 Selected Proposed Regulatory Changes | 13 | ||
| 1.13 The Way Forward, Macroprudential Analysis and Early Warning Systems for Fragility and Crises | 13 | ||
| 1.14 Regulatory Tumbleweed or is it Tangleweed? A Critique of Proposed Changes | 15 | ||
| Chapter 2: EVOLUTION OF THE STRUCTURE OF THE GLOBAL FINANCIAL SYSTEM PRE-CRISIS AND SYSTEMIC HOT SPOTS | 19 | ||
| 2.1 Capital Markets | 20 | ||
| 2.2 Agents | 27 | ||
| 2.3 Systemic Hot Spots | 38 | ||
| Chapter 3: CRISIS UNRAVELLING AND KEY EVENTS | 47 | ||
| 3.1 Imbalance Build-Up in the US Economy (2001-07) | 48 | ||
| 3.2 US Sub-Prime Crisis (2006-2007 and Beyond) | 50 | ||
| 3.3 US Bank and NBFI Failures and Confidence Crisis (September 2008 and Beyond) | 51 | ||
| 3.4 Global Bank and NBFI Failures (January 2008 and Beyond) | 52 | ||
| 3.5 Impact on Global Real Macro-Performance (2008 and Beyond) | 56 | ||
| Chapter 4: SYSTEMIC AND INSTITUTIONAL COST OF THE 2007-10 CRISIS | 61 | ||
| 4.1 Definition of Systemic Financial Crises | 61 | ||
| 4.2 Output Costs | 62 | ||
| 4.3 Agent Losses | 64 | ||
| 4.4 Crisis Outlook | 71 | ||
| Chapter 5: REGULATORY REGIMES AND RESPONSE TO THE CRISIS | 87 | ||
| 5.1 Existing Regulatory Regimes Pre-Crisis | 88 | ||
| 5.2 Losses by Type of Regulatory Regime | 88 | ||
| 5.3 Policy Response | 90 | ||
| 5.4 Regulatory Challenges and Proposed Changes | 96 | ||
| 5.5 Selected Proposed Changes to Regulatory Bodies and to Banking Regulations | 99 | ||
| 5.6 Selected Proposed Changes to Regulation | 101 | ||
| Chapter 6: THE WAY FORWARD, MACROPRUDENTIAL ANALYSIS AND EARLY WARNING SYSTEMS FOR FRAGILITY AND CRISES | 105 | ||
| 6.1 General Conceptual Design and Elements of a Robust and Applicable EWS | 105 | ||
| 6.2 History of EWS Design | 106 | ||
| 6.3 Performance of these Models: Did they Predict the Crisis? | 108 | ||
| Chapter 7: REGULATORY TUMBLEWEED OR IS IT TANGLEWEED? | 113 | ||
| 7.1 EWS Implications for Regulation | 113 | ||
| 7.2 Critique of Proposed Changes | 120 | ||
| 7.3 Blowing Tumbleweed or is it Tangleweed? Focal Points to Address | 121 | ||
| End Matter | 125 | ||
| Appendix 1: CURRENT CRISIS TIME LOG ACROSS THE GLOBE | 125 | ||
| Appendix 2: A BRIEF HISTORY OF CRISES IN THE PAST | 167 | ||
| References | 171 | ||
| Index | 179 |