•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