Asian Financial Crisis (AFC) 1997 In 1997 the financial crisis came to light, and essentially being a short term phenomenon, it caused crash of the Malaysian economy. Among the factors that caused the financial crisis in Malaysia were speculative attacks, deficiencies in risk management, form of corporate governance and equity market, and the legal infrastructure .The Malaysian economic was vulnerable due to the unsustainable pace of economic growth and over-valued exchange rates. The relationship between firms, government and banks in Malaysia in the financial crisis period cannot be describe as good compared to the other Asian countries. There was no clear policy on directed lending to big firms, and to that extent one cannot say that the
The Great Depression revealed the dangers of supplanting real industry and enterprise with a “casino economy” in which the high interest rates impose an intolerable and unsustainable debt burden on private income. Hence regulations were put in place to curb over speculation and increasing interest rates. Glass Steagall Act was one of them. However regulations became a target of Reagan administration reformers. For example, the Garn-St. Germain Act allowed S&L associations to take demand deposits and make commercial and industrial loans.
Five years since the peak of the crisis, its effects still felt in some economies; analysts have sought to argue how global imbalances hugely contributed to the crisis. In this section, the paper looks at how global imbalances have insufficient information on global financing and how this cannot be relied on to assert it as a cause of the crisis. Firstly, current accounts and net capital flows do not provide sufficient information on financing. On the contrary, they serve to highlight net claims adjustments that result from exchange of real goods and services in the country. In so doing, current accounts and net claims leave out gross flows and their impact on existing stocks.
According to Moody’s , these downgrades come in due to either problems in risk management or a history of high volatility . Figure – BOA’s stock price during Global Financial Crisis
China and the US, as the world's biggest developing country and developed nation, used a variety of measure to prevent the financial crisis. To start with, as mentioned above, American governments’ great failure was the market superintends strength inadequacy. So regulators must accept responsibility for preventing the asset bubbles of financial markets（Mark Thomas, 2009）. As consequence, the Obama government has issued a series of prevent measures. They announced plans to impose much more regulation and oversight on financial markets to reduce systemic risk and avoid the repeat of the financial disasters (Dan Robinson, 2009).
Firstly, the crisis is between 1971 and 1973 due to the end of the Bretton Woods System and the oil crisis. Secondly, the crisis happened due to decline in commodity prices together with the second oil crisis in 1980 to 1981, followed by the electronic crisis in 1985 and 1986. Lastly, the fourth crisis happened during 1997 and 1998 due to financial crisis (Ming-Yu Cheng & Sayed Hossain, 2001). The financial crisis has given huge impact on the country economic growth and subsequent touch the country’s exchange rate. Although, depreciation of the Malaysia’s currency has pros and cons, the current state of affairs has recognized that the weakening of Ringgit in the world market results in more negative than positive consequences especially to citizens.
Name: Shivashuruti Saravanan Student No: S10128296K Topic: Global Financial Crisis The global financial crisis (GFC) is widely assumed to have originated in July 2007 with the credit crunch when investors in US lost their assurance in the monetary worth of subprime mortgages causing a liquidity crisis. This will eventually cause the US Federal Bank to implant an extensive sum of capital into financial markets. In 2008 September with the collapse of Lehman Brothers a bank, the crisis plunged to further worsen conditions as stock markets around the world disintegrated and became volatile. From Economist’s perspective it was painful but easy to understand that that was too much foreign currency flowing into the US from Asian countries especially
The consensus is that the overall commercial banks’ financial condition contributes to the several risks that affect bank performance. Anthony M. Santomero (1996), Alina Mihaela Dima and Ivona Orzea (2009) and David H.Pyle (1997) included the market risk, credit risk, operational risk, liquidity risk, interest rate risk and foreign exchange risks as the areas of concern and on-going risk monitoring and management in their papers. Oldfield and Santomero (1995) argued that risks faced by bankers can be divided into three different types. These are (i) risk can be eliminated or avoided if in prospecting, (ii) risk can be liquidated by transfer to another party and (iii) risk that must be accepted and managed at the firm level. Anthony M. Santomero (1996) stated the banking firm relied on the four-step process to implement a risk management system.
Main concerns surrounding the application of fair value accounting to banks and other financial institutions are identifies in this section. Does fair value accounting create difficulties in risk and capital management? In managing risk and capital, the introduction of “fair value accounting” in US GAAP & in IAS 39 was creating difficulties observed by many bankers before the present crisis. Resultant to the shift to fair value accounting, a four way treatment of financial assets was resolute on the following difficulties. Which are held to maturity, loans and receivables, available for sale & trading assets.
Contradictions and Crises in Economic Transformation: Political Turmoils in Post-Crisis Malaysia In the academic circle of Southeast Asian Studies, the financial crisis in 1997 is the juncture of continuities and changes because the crisis enormously impacts political and economic systems of the countries in Southeast Asia. Regarding its impacts, the essay has the aim to examine how the financial crisis affects the politics of contemporary Malaysia. The Impossibility Trinity Before answering the main question, the essay explains the emergence of the economic crisis. The mainstream macroeconomic literature usually describes that the Asian financial crisis was a consequence of the wrong macroeconomic policy. According to the theorem of “Impossibility Trinity”, Wyplosz (1998: 73) narrates that the Southeast Asian monetary authorities lose abilities to control the policy tools, which are interest rate and money supply, because of the coexistence of fixed exchange rate regime and free capital mobility.