OPPapers.com

Finacial Crisis Impact On Asia

{draw:g}
{draw:rect} {draw:frame}
IMPACT OF FINANCIAL CRISIS ON THE ASIAN ECONOMIES
Financial crisis {draw:frame}
The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crisis include stock market crashes and the bursting of other financial bubbles, currency crisis, and sovereign defaults
Many economists have offered theories about how financial crisis develop and how they could be prevented. There is little consensus, however, and financial crisis are still a regular occurrence around the world.
1.1 Types of financial crisis
Banking crisis
Speculative bubbles and crashes
International financial crisis
Wider economic crisis
Banking crisis When a bank suffers a sudden rush of withdrawals by depositors, this is called a bank run. Since banks lend out most of the cash they receive in deposits (see fractional-reserve banking), it is difficult for them to quickly pay back all deposits if these are suddenly demanded, so a run may leave the bank in bankruptcy, causing many depositors to lose their savings unless they are covered by deposit insurance. A situation in which bank runs are widespread is called a systemic banking crisis or just a banking panic. A situation without widespread bank runs, but in which banks are reluctant to lend, because they worry that they have insufficient funds available, is often called a credit crunch. In this way, the banks become an accelerator of a financial crisis.
Examples of bank runs include the run on the Bank of the United States in 1931 and the run on Northern Rock in 2007. The collapse of Bear Stearns in 2008 has also sometimes been called a bank run, even though Bear...