The period between the financial crisis at the beginning of the 21st century and the global financial crisis in 2008 was a boom phase. During such the GDP in the European Union doubled, the housing market saw a steep increase in demand and pricing which was supported by a significant increase in private debts. Especially during this period banks used the principle of securitization to pool illiquid loans and make them tradeable in forms of Asset-Backed Mortgages. Such normally were handled by Special Purpose Vehicles, a special business entity created only to handle specific assets and therefore remove such from the banks own balance sheet. The securitization market as well saw an extreme increase in traded volume. Important to note is here that such products were mostly used by banks as collateral in the interbanking market. With increasing interest rates in the United States and EU, a high number of loans with variable interest rates and therefore increasing fault rates the ABS became more and more of a risk whilst the housing market cooled down. The financial crisis swept from the USA to EU because ABS are traded globally. As the trust in the ABS used as collateral was lost due to the issue evaluating the quality of the ABS correctly the interbanking market came do a sudden stop and the market became illiquid. The support of the ECB and the national institutions was necessary to provide sufficient liquidity to the financial sector to avoid a collapse of the whole system. Nevertheless, the consequences of the financial crisis in the EU were that sovereign debts increased significantly leading further into the European debt crisis. Besides rules and regulations were tightened to avoid such crisis in the future and additional costs to the taxpayers.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Problem and Objective
- The situation prior to the financial crisis in Europe
- Regulating Framework
- Economic situation for selected EU countries and United States
- Interbanking market and Asset-Backed securities
- The financial crisis hitting the European Union
- Economic consequences
- Social and political Consequences
- Conclusion and outlook
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper aims to describe and explain the financial crisis of 2008 in the European Union. It examines the pre-crisis economic and financial situation, focusing on key factors leading to vulnerability. The analysis then explores how the US subprime mortgage crisis spread to the EU, detailing the impact on the European financial sector, associated costs, and resulting consequences.
- The economic and regulatory environment in Europe prior to the 2008 crisis
- The role of securitization and the interbank market in amplifying the crisis
- The transmission of the crisis from the US to the EU
- Economic consequences of the crisis in the EU
- Social and political consequences of the crisis in the EU
Zusammenfassung der Kapitel (Chapter Summaries)
Introduction: This section introduces the 2007-2009 Global Financial Crisis (GFC), its origins in the US subprime mortgage crisis, and its severe impact on the global economy, including the European Union. The paper's objective is clearly stated.
The situation prior to the financial crisis in Europe: This section sets the stage by describing the economic situation in Europe before the crisis, including the regulatory framework, economic conditions in selected EU countries and the US, and the functioning of the interbank market and asset-backed securities (ABS).
The financial crisis hitting the European Union: This section will analyze the impact of the GFC on the European Union, focusing on the economic and social and political consequences.
Schlüsselwörter (Keywords)
Global Financial Crisis (GFC), European Union, Asset-Backed Securities (ABS), Securitization, Interbank Market, Subprime Mortgage Crisis, Sovereign Debt, Economic Crisis, European Debt Crisis.
- Arbeit zitieren
- Malte Kanngießer (Autor:in), 2023, The impact of the global financial crisis 2008 on the European banking sector, München, GRIN Verlag, https://www.grin.com/document/1508301
