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    Sub-Prime Crisis

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    surajvsakpal
    The document discusses the subprime mortgage crisis, how it began in the United States housing market in 2007 and spread globally. It provides details on how subprime loans were packaged and resold as securities, which then declined in value and caused widespread failures in the financial system. The crisis led to a global economic slowdown, business failures, job losses, market corrections, and changes in banking practices.

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    Sub-Prime Crisis

    Uploaded by

    surajvsakpal
    10K views18 pages
    The document discusses the subprime mortgage crisis, how it began in the United States housing market in 2007 and spread globally. It provides details on how subprime loans were packaged and resold as securities, which then declined in value and caused widespread failures in the financial system. The crisis led to a global economic slowdown, business failures, job losses, market corrections, and changes in banking practices.

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    The document discusses the subprime mortgage crisis, how it began in the United States housing market in 2007 and spread globally. It provides details on how subprime loans were packaged and resold as securities, which then declined in value and caused widespread failures in the financial system. The crisis led to a global economic slowdown, business failures, job losses, market corrections, and changes in banking practices.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    10K views18 pages

    Sub-Prime Crisis

    Uploaded by

    surajvsakpal
    The document discusses the subprime mortgage crisis, how it began in the United States housing market in 2007 and spread globally. It provides details on how subprime loans were packaged and resold as securities, which then declined in value and caused widespread failures in the financial system. The crisis led to a global economic slowdown, business failures, job losses, market corrections, and changes in banking practices.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 18

    •What is sub-prime lending?

    •How basically we define subprime


    crisis?

    •What this did to the $1.5 trillion US


    housing industry?
    •How and when did the subprime
    mortgage crisis begin?

    •When did the slide begin?

    •HOW SUB PRIME CRISIS SPREAD?

    •Did it cause business failure?


    HOW SUB PRIME CRISIS SPREAD?
    FINANCIAL RMBS
    INSTITUTION CDO
    LOWEST RISK /
    HIGHEST RATING
    SECURITISATION ( SENIOR )

    MEDIUM RISK
    ( MEZZANINE )

    PROCEEDS SALE of LOAN HIGHEST RISK /


    ( EQUITY )
    SUB-PRIME LENDER
    INVESTORS

    SUB-PRIME BORROWER
    BUYING HOME
    BANKS

    HEDGE FUNDS
    LOAN INSURANC E COS.

    PENSION FUNDS
    •What was the spillover effect of the
    slide?

    •When did the people realize the


    problem?

    •Why did the crisis spread so far and


    wide?
    Comparison between Traditional &
    Sub prime model.
    •What is Domino Effect?

    •“Finally, you have broader considerations that


    might follow what you would call the ‘falling
    domino’ principle. You have a row of dominoes set
    up, you knock over the first one, and what will
    happen to the last one is the certainty that it will go
    over very quickly. So you could have a beginning of
    a disintegration that would have the most profound
    influences. ”
    -- Dwight D. Eisenhover, (former US
    President)
    •How many are affected by the problem
    on hand?

    •What is the action taken by rating


    agencies?

    •What is to be followed now?


    enders : The Biggest
    Culprits
    nvestment Banks
    GLOBAL MARKETS 16TH JULY(BEFORE) 17TH AUGUST(AFTER) CHANGE % FALL

    DOW JONES 13950.98 13079.08 -871.9 6.249

    NASDAQ 2697.34 2505.03 -192.31 7.129

    BSE SENSEX 15311.22 14141.52 -1169.7 7.639

    HANG SENG 22953.94 20387.13 -2566.81 11.182

    KOSPI COMPOSITE 1949.51 1191.55 -757.96 38.879

    NIKKIE 225 18217.27 15273.68 -2943.59 16.158

    WEIGHTED INDEX 9417.32 8090.29 -1327.03 14.091

    SHANGHAI INDEX 3896.19 4656.57 760.38 19.515

    FTSE 100 6697.7 6064.2 -633.5 9.458

    DAX() 8105.69 7387.29 -718.4 8.862

    CAC 40 () 6125.6 5363.63 -761.97 12.439

    IBOVESPA() 57374 48558.76 -8815.24 15.364


    iquidity crunch in the Economy

    orrection of Prices

    upee Appreciation & Slump in


    Economic activity
    taff cuts

    osses to Banks

    hort-term impact on the stock markets


    ound banking practices

    ontrolled derivatives market

    ne of the wrong lessons that could be


    learnt from the sub-prime episode is
    imited investment by Indian
    companies abroad.

    uality inward investment.

    eputation risk is as real as credit risk.

    inancial institutions can’t afford to be

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