Subject category:
Economics, Politics and Business Environment
Published by:
IBS Case Development Center
Length: 20 pages
Data source: Published sources
Topics:
Financial crisis; Sub-prime mortgage business; Mortgage backed securities (MBS); Credit default swaps (CDS); Collateral debt obligations (CDOs); Sub-prime mortgage crisis; US treasury bonds; Fractional reserve banking; Investment banks; Global financial order; Union Bank of Switzerland (UBS); Global banks; Financial innovation; Foreign investments
Abstract
This case, while giving the US' role in pursuing free market philosophy both domestically, as well as internationally, also highlights how the US banking institutions have become harbingers of the 'Mega Banking' model. The case focuses on the role of global banks in increasing the wealth in the world markets. It brings out the role of these banks in the US financial crisis and cites the problems with the US financial system. In the light of the US financial crisis (2008), what should be the alternate strategies? Does this crisis spell a doomsday for global banking superhouses? Wealth maximisation was the axiom that has been driving all the modern day corporations. To realise this ultimate dream, while some companies have simply invented new products and with that new industries, some other companies stuck to the age-old business models, but expanded to new segments. Banking falls into the latter category. Banks from the developed world, especially those from the US, expanded their size and scope aided by globalisation and liberalisation. Sure, they have expanded their size and scope, and with that they have also increased their risk exposure. As is evident from the US financial crisis, the so called global banks have become vulnerable to changes in any part of the globe.
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Abstract
This case, while giving the US' role in pursuing free market philosophy both domestically, as well as internationally, also highlights how the US banking institutions have become harbingers of the 'Mega Banking' model. The case focuses on the role of global banks in increasing the wealth in the world markets. It brings out the role of these banks in the US financial crisis and cites the problems with the US financial system. In the light of the US financial crisis (2008), what should be the alternate strategies? Does this crisis spell a doomsday for global banking superhouses? Wealth maximisation was the axiom that has been driving all the modern day corporations. To realise this ultimate dream, while some companies have simply invented new products and with that new industries, some other companies stuck to the age-old business models, but expanded to new segments. Banking falls into the latter category. Banks from the developed world, especially those from the US, expanded their size and scope aided by globalisation and liberalisation. Sure, they have expanded their size and scope, and with that they have also increased their risk exposure. As is evident from the US financial crisis, the so called global banks have become vulnerable to changes in any part of the globe.