Banking Crisis Analysis

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Banking crisis refers to bank involved in high-risk industries (such as real estate, stock) in excess or made a loan to enterprises that leading to unbalanced assets and liabilities, bad debt burden so that make the capital operation stagnant and bankruptcy. Banking crises include: bank run, banking panic and systemic banking crises. Banking is the main part of the financial sector, has a very important position in a country’s social and economic life. Since the 20th century, the financial industry around the world shows a tendency of volatile and banking crisis is gradually by a single regional banking crisis for the development of the global banking crisis. The occurrences of bank crisis mainly have the following reasons: 1. Bank run A…show more content…
Therefore, the bank must diversify their funding sources; make their investment out appropriately. It is important to note that a good operating performance and master quite a proportion of the deposit, otherwise, once the economy has some turmoil or unrest, bank bankruptcy under run easily. The most serious wastage is depositors when a bank went bankrupt so that it is easily to cause unrest. The objective cause of bank run lies in the non-performing assets of banks operating losses; the subjective reason is that depositor’s confidence in banks shaken. Bank run with nonlinear expansion feature and it’s harmful for the economic development and stability. 2. Banking panic Banking panic refers to many bank failures in the banking systems. Bank panics reduce indirect financing activities through banks, cause investment to shrink, overall the level of economic activity and serious adverse impact on the economy. At the same time, bank failures means that the interests of depositors are damaged. Bank panic is information asymmetry between the depositors and the bank; depositors are lack of the understanding of bank asset quality in formation, it will lead to cause the bank panics.…show more content…
But from these decades especially nearly ten years of practice, the United States is not shoulder responsibility, interests and responsibilities. In 2005, the GDP in United States (12.5 trillions dollars) is more than 50% to loan balance ($18 trillion dollars). And the stock market capitalization ($20 trillion dollars) is more than GDP 60%. The government in U.S. had $10 trillion debt, average $30000 each people. Each financial index soared means that a lot of bubbles, will bring the financial turmoil. From a macro point of view, the international financial crisis is caused by the existing world monetary system deeply. As a result, it is inevitable trend to refactor the monetary system of the new international economic

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