It is widely acknowledged that the 2007 – 2009 financial crises have been one of the most ferocious of our history. The financial crisis began on August – September 2007 and the Lehman Brothers' bankruptcy just confirmed that the fantastic cycle of economic growth had finished. Moreover, since September 15, 2008 the domino effect due Lehman Brothers' collapse spread the fear among the financial markets and investors.
In the UK, the Northern Rock crisis has been one of the most dramatic and clearest consequences of the recent financial collapse. As a result of that, the Bank of England had to act as a lender-of-last-resort and the British Government offered guarantee for deposits of a bank for the first time in the history. Northern Rock was previously a mutual building society converted to bank in 1997, however it remained focused on the mortgage market and became the eighth largest bank and the fifth largest mortgage lender in the UK. Since its demutualization, Northern Rock had grown through heavy reliance on borrowing with about 50% of its funding coming from securitization.
In order to explain the Northern Rock crisis, it is necessary to analyze several circumstances as a whole, since it was the result of a multi- dimensional problem. This paper seeks out to do so by taking a closer look at the business model, the financial turmoil, and the attitude of regulators.
Inhaltsverzeichnis (Table of Contents)
- Chapter 1: IMPACT OF THE CRISIS ON FINANCIAL MARKETS
- 1.1- BONDS MARKET.
- 1.2-STRUCTURED FINANCAL INSTRUMENTS..
- Mortgages Backed Securities (MBS)...
- Asset Backed Commercial Paper (ABCP).
- Collateralised Debt Obligations (Cash flow) (CDO).
- 1.3-THE ROLE OF THE POLICY MAKERS..
- Bank of England (BoE) ..
- Financial Service Authority (FSA).
- HM Treasury (HMT).....
- 1.4.-REGULATORY REFORMS
- Chapter 2: NORTHERN ROCK-CASE OF STUDY
- 2.1-NORTHERN ROCK CRISIS.
- 2.2-CAUSES OF THE CRISIS
- Business model..
- Financial turmoil
- Attitude of regulators
- 2.3- HOW COULD THE CRISIS HAVE BEEN AVOIDED?.
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This document examines the impact of the 2007-2009 financial crisis on financial markets and institutions, specifically focusing on the case study of Northern Rock. The study aims to analyze the effects of the crisis on different financial instruments, assess the role of policy makers in managing the crisis, and explore the causes and potential preventative measures regarding Northern Rock's crisis.
- Impact of the financial crisis on bond markets
- Role of structured financial instruments, particularly MBS, ABCP, and CDOs in the crisis
- Policy responses to the crisis by key institutions like the Bank of England, Financial Services Authority, and HM Treasury
- Analysis of Northern Rock's business model and its vulnerability to the crisis
- Examination of potential measures to prevent or mitigate similar financial crises
Zusammenfassung der Kapitel (Chapter Summaries)
Chapter 1 analyzes the impact of the 2007-2009 financial crisis on financial markets, particularly focusing on the bond market and structured financial instruments like MBS, ABCP, and CDOs. The chapter explores the role of subprime mortgages in triggering the crisis and discusses the consequences for liquidity and the interbank market. It also examines the responses of key policy makers, including the Bank of England, the Financial Services Authority, and HM Treasury, to the unfolding crisis.
Chapter 2 focuses on the Northern Rock case study, examining the causes of the crisis, including the bank's business model, the broader financial turmoil, and the role of regulators. The chapter explores how the crisis could have been potentially avoided and draws conclusions on the lessons learned from Northern Rock's experience.
Schlüsselwörter (Keywords)
The key focus areas of this document include the 2007-2009 financial crisis, bond markets, structured financial instruments (MBS, ABCP, CDOs), subprime mortgages, liquidity crisis, interbank market, policy responses, Northern Rock case study, business model, financial turmoil, and regulatory oversight.
- Quote paper
- Daniel Plaza (Author), Jaume Bosch (Author), 2010, The Impact of the Financial Crisis (2007-2009) on Financial Markets and Institutions, Munich, GRIN Verlag, https://www.grin.com/document/377036
