Global Finance Crisis

PRESENTATION OUTLINE
Meaning of Global Finance Crisis Over view of Global Finance crisis Consequences - U.S.A - UK - India

GLOBAL FINANCE CRISIS

The global financial crisis of 2008 is the worst of its kind since the Great Depression Began with failures of large financial institutions in the United States Morgan Stanley, Goldman Sachs, Merrill Lynch Deutsche Bank ,Barclays.

Rapidly evolved into a global crisis resulting in a number of European bank failures

MEANING OF GLOBAL FINANCIAL CRISIS

The term financial crisis is applied broadly to a variety of situations Usually, some financial institutions or assets suddenly lose a large part of their value Banking Panics (and recessions) Stock market crashes Bursting of financial bubbles And biggest organizations

GLOBAL FINANCE CRISIS- "Red September"

September 14, 2008: Merrill Lynch sold to Bank of America amidst fears of a liquidity crisis and Lehman Brothers collapse

September 15, 2008: Lehman Brothers files for bankruptcy protection September 19, 2008: Paulson financial rescue plan unveiled after a volatile week in stock and debt markets.

September 25, 2008: Washington Mutual was seized by the Federal Deposit Insurance Corporation, and its banking assets were sold to JP Morgan Chase for $1.9bn.
Sep-08 Oct-08

Sep-08

Sep-08

Sep-08

Sep-08

September 7, 2008: Federal takeover of Fannie Mae and Freddie Mac

September 16, 2008: Moody's and Standard and Poor's downgrade ratings on AIG's credit on concerns over continuing losses to mortgage-backed securities, sending the company into fears of insolvency.

September 17, 2008: The US Federal Reserve loans $85 billion to American International Group (AIG) to avoid bankruptcy.

September 29, 2008: The House rejected bailout bill, DJIA down 7%

October 3,2008: The House pass the bail out bill

Created by Robin Thieu, 2008 Fall

 Commercial banks suffer a sudden rush of with drywalls by depositors, this is called a bank run September 7, 2008: Two United States Government sponsored enterprises (GSEs), Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation), into conservator ship run by FHFA September 14, 2008 Lehman Brothers files for bankruptcy. Sale of Merrill Lynch to Bank of America September 16, 2008 AIG faces severe liquidity crunch Financial institutions lost a large part of their value incoming days and weeks

Banking Panics (and recessions)

WHAT`S HAPPENING IN RECENT YEAR

1 year ago RBS paid $100 billion for ABN Amro. For this amount it could now buy: Citibank $22.5 billion Morgan Stanley $10.5 billion Goldman Sachs $21 billion Merrill Lynch $12.3 billion Deutsche Bank $13 billion Barclays $12.7 billion And still have $8 billion change......with which it would be able to pick up GM, Ford, Chrysler and the Honda F1 Team.

IMMEDIATE EFFECTS OF CURRENT CRISIS IN THE UK

Unemployment increased by 164,000 between May and August 2008; almost a 10 % rise from 1.63 million Most hard hit is London where number of jobless looking for jobs increased by 42 % in September 2008 Some estimates put 1.5 million additional unemployment generated by end-2010 leading to an unemployment rate of 10% from current 5.7 %.

IMMEDATE EFFECTS OF CURRENT CRSIS IN THE USA

Slowdown in GDP Current 2008 projection 1.6 % (down from 2.8 % projection in April 2007) 2009 projection: 0.06 % Consumer confidence lowest since 1978 October 2008 consumer sentiment index: 57.5 from 70.3 in September Construction activity much worse: Q208 new constructions starts are 40 % less than post 9/11 (Q401)

IN INDIAN..??

STOCK MARKET DOWN INDIAN CURRENCY VALUE 1$=49.89 IT PROJECTS INFLATION RATE [HIGHEST IS 12.6%] GDP TOWARDS DOWN INCREASING FUEL, METAL AND FMCG GOODS

India: Vibrant Capital Market

Sensex The Bombay Stock Exchange index rise 20 times from 1990s to reach 20,000 mark in November 2007.
India is among the major destinations across the globe for inflow of US Dollar
25000

11 December 2007 Crossed 20,000 mark

20000

Sensex has risen 20 times in the period 1990-2007

1 5000

30 December 1999 Crossed 5,000 mark

1 0000

07 February 2006 Crossed 10,000 mark

Emergence of industry and confidence of local investors along with the FIIs has led to upsurge of the Sensex

5000

1Ju 1- l -97 Ja n 1- -98 Ju 1- l -9 Ja 8 n1- 99 Ju 1- l -99 Ja n 1- -00 Ju 1- l -0 Ja 0 n 1- -01 Ju 1- l -01 Ja n 1- -02 Ju 1- l -02 Ja n 1- -03 Ju 1- l -03 Ja n 1- -04 Ju 1- l -04 Ja n 1- -05 Ju 1- l -05 Ja n 1- -06 Ju 1- l -06 Ja n1- 07 Ju 1- l -07 Ja n08

FIIs have infused large investments into the Indian stock market

Encouraging industry performance

Increased local investors confidence

11

India: Fastest Growing Free Market Democracy

GDP Growth

Forex

FII Flow

FDI

Per Capita

Inflation

1990

4.9 %

< USD 1 billion

USD 1 million (1993)

USD 16.1 billion in 2007-08

USD 97 million

USD 390

9%

2008*

8.7 %

USD 309 billion as on Mar 28, 2008

USD 12.7 billion in 2007-08 till December (USD 16 billion in 2006-07)

USD 740

6.4 %as on JAN 15, 2009 12

* Annualized data used to show comparison with 1990

Source: Times of India, RBI, DIPP, Indian Budget, Rediff

INDIAN ECONOMY INDICATORS

BANK RATE 6.0% REPO RATE 6.5% REVERSE REPO RATE 5.0% CASH RESERVE RATIO 5.5% STATUTORY LIQUIDITY RATIO[SLR] 24% PRIME LENDING RATE 12.5% SAVINGS BANK RATE 3.5% AND GDP 7.5% INFLATION 6.4%