Scribd Logo
Upload

Welcome to Scribd!

  • Sub Prime Crisis

    Uploaded by

    shivani mehta
    80 views25 pages
    US sub-prime market crisis-losses worth $181 billion to the world's top 45 banks by the end of FY08 O O India's largest private sector bank ICICI Bank was the first bank to announce a loss of about Rs. 1056 crores owing to the sub PRIME CRISIS of US in the FY08.

    Original Description:

    Original Title

    sub prime crisis

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    US sub-prime market crisis-losses worth $181 billion to the world's top 45 banks by the end of FY08 O O India's largest private sector bank ICICI Bank was the first bank to announce a loss of about Rs. 1056 crores owing to the sub PRIME CRISIS of US in the FY08.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    80 views25 pages

    Sub Prime Crisis

    Uploaded by

    shivani mehta
    US sub-prime market crisis-losses worth $181 billion to the world's top 45 banks by the end of FY08 O O India's largest private sector bank ICICI Bank was the first bank to announce a loss of about Rs. 1056 crores owing to the sub PRIME CRISIS of US in the FY08.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 25

    I NTRODUCTION

    •What is sub-prime lending?


    •
    •Why sub-prime lending?
    High interest rates (ARM-2/28)
    Boom in realty sector

    •When?
    The dotcom bubble of 00 - 01 and 9 / 11
    attacks drove the US FEDERAL RESERVE to
    follow an ultra-easy monetary policy to curb
    RECESSION

    $
    T he P articipants Of The C risis
    •Lenders : The Biggest Culprits

    •Investment Banks
    •
    •Homeowners
    •
    •Government and regulators
    •
    •Investor Behavior
    •
    •Hedge Funds
    •
    •
    •
    TRIGGER FOR SUB - PRIME CRISIS
    ØRising inflation
    ØHike in the interest rates
    Ø

    Source: Tuatara Management Limited, 4 July 2008 4


    Causes
    IMPACT OF SUB-PRIME CRISIS
    Financial Tsunami

    • American Home Mortgage, one


    of the largest US
    • Independent home loan providers,
    filed for bankruptcy after laying off
    the majority of its staff
    • Northern Rock asked for and been
    granted emergency financial
    support from the Bank of England,
    in the latter's role as lender of
    last resort
    • Lehman Brothers & Washington
    Mutual Inc. filed for Ch11
    • The Federal Reserve provided an
    emergency loan of $85b to AIG
    • British bank Bradford & Bingley
    was nationalized by UK
    government by taking control of
    the bank’s £50b mortgages and
    loans
    • Banks uplift the loan requirement
    • Organization not able to grow
    • Financial crunch in world
    • Low consumption leads to low
    demand
    • Low growth rate
    •
    •
    RECESSION
    Impact of SUBPRIME crisis on
    INDIA
    THE GOOD, BAD & UGLY
    BANKING
    Ø . SBI has a $5 million exposure to Lehman Bros. from its $250
    billion portfolio.
    Ø
    Ø US sub-prime market crisis-losses worth $181 billion to the
    world’s top 45 banks by the end of FY08.
    Ø
    Ø India’s largest private sector bank ICICI Bank was the first bank
    to announce a loss of about Rs. 1056 crores owing to the sub
    prime crisis of US in the FY08
    Ø
    Ø Punjab national Bank, Bank of India, State Bank of India, Bank
    of Baroda were major banks having an exposure to the
    instruments issued by Lehman and Merrill Lynch.
    Ø
    STOCK MARKETS
    Ø July 23, 2007, Sensex touched a new high
    of 15,733 points
    •
    Ø On July 27, 2007 Sensex witnessed a huge
    correction because of selling by Foreign
    Institutional Investors
    •
    Ø BSE Sensex fell by 615 points in a single
    day on August 1, 2007.
    •
    FII’s
    •

    Ø FIIs’ stake in infrastructure, has seen an erosion of


    4 per cent to 16.5 per cent
    Ø
    Ø IT service companies, which were languishing last
    year due to the rupee appreciation, have once
    again caught the fancy of FIIs and they have
    increased stakes in these companies from 25.5
    per cent to 28 per cent.
    Ø
    Ø FIIs’ exposure to telecom stocks has slipped
    marginally from 17.7 per cent to 17.1 per cent.
    Ø Citigroup, which reported around losses of $18
    billion in the sub-prime crisis, reduced its
    holdings in 47 companies
    REAL ESTATE &
    INFRASTRUCTURE
    ØREAL ESTATE SECTOR
    ØAdverse impact on the infrastructure companies as it disturbed the financial
    atmosphere for the companies.
    ØOver a period of time, fund raising by these companies could become a
    problem.
    Ø
    ØIT SECTOR
    IT slow downs:-
    Foreign Institutional Investors(FII) Impact .
    Rupee appreciation
    Decrease in Foreign exchange
    Job cuts
    Reason, why india didn’t get much
    Affected:-
    •India is driven by domestic consumption
    •Limitation on current /capital account
    convertibility
    •Low investment in US
    •Agriculture , a major source of income
    Lessons from the crisis
    • Nothing goes on forever
    • whenever there is a buildup in growth
    rates of world economy and it is
    sustainable for a couple of years, there is
    an event, which slows down the
    economies.
    •

    You might also like