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Current Financial Crisis And Banking Industry

859 words - 4 pages

Current financial crisis and banking industry
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Current Financial Crisis and Banking Industry
The current financial crisis traces its origin in the United States of America, which has affected many banks worldwide. This financial crisis especially in commercial banks has been very costly and has led to bankruptcy of major banks around the globe. Reinhart etal. (2011) described the financial crisis as an equal opportunity menace, which affects poor and rich countries. The financial crisis derives its origin from the public and private sectors. It comes in various sizes and shapes and it can spread across borders ...view middle of the document...

This shows that inevitable accidents are not only dictated by technology, but also by poor organization as well as unionization in industries in which the system elite have no interest in safety but put profits as their priority. In such organizations, their risk exposure is minimal while the risk faced by the society is high. This is well reflected in the current financial crisis, where the source of initial failure lay in individuals’ appetite to reap huge profits.
An example is the occurrence in the US mortgage market in 2000, where the mortgage lenders relaxed the underwriting standards, making mortgage loans available to everyone including those with low credit rating. Moreover, income standards were also reduced which allowed buyers to acquire higher priced homes without extra income. Such relaxation of income standards for morgages and underwriting standards contributed to the increased demand for property and real estate prices by increasing the number of people eligible for morgages. As a result, the market value of homes increased exceeding the cost of borrowing (Moore & Heidi, 2008).
Disaster Incubation Theory was an idea contained in Turner’s booked called “Man-made Disasters” (Turner & Pidgeon, 1997). The theory is also a theory of accidents like the previous theory and it draws attention to the managerial perspective of disasters. He describes disasters development through various stages which may take many years, where signals about the impending danger are ignored or misunderstood. During the disaster’s initial stage, there are norms and beliefs where there is violation of precautions. Stage two follows and is characterised by organizational exclusivity, informational difficulties, failure to comply with discredited regulations, strangers exacerbating...

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