AFF5280 ASSIGNMENT MONASH UNIVERSITYWord格式文档下载.docx
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AFF5280 ASSIGNMENT MONASH UNIVERSITYWord格式文档下载.docx
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4,004
3thSeptember2012
September3,2011
DrMohammadHoque
RoomH3.48
DepartmentofAccountingandFinance
MonashUniversity
POBox197
CaulfieldEast,Vic.3145
Australia
DearDrHoque
Asrequested,thereportiswrittenwiththepurposeoftheassessmentofthegenesisoftheGlobalFinancialMarketandEuropeDebtCrisis.ThereportalsoaddressesandassessesthedifferencesandlinkagesbetweenthesecrisesandtheimpactupontheAustralianbankingindustry.
ThereportalsoprovidestherecommendationforresolvingtheEuropeanDebtCrisisandcreatingtheshieldforAustralianbanksforsuchcrisis.
Shouldyouhaveanyinquiryregardingthereport,pleasedofeelfreetocontactuson04-49281031or04-52070224.Wewouldbehappytodiscusswithyouforfurtherclarification.
BestRegard,
ChaiwutTheeravuttichaikij,23629665
KaiKang,23454547
3thSeptember2011
ExecutiveSummary
TheobjectiveofthisreportistoclarifythegenesisoftheGFC,theEuropeDebtCrisisandtheimpactuponAustralianbankingindustryfromsuchcrises.Therecommendationtoprotectfromthecriseswillbeexamined.
SubprimeLoanswereaninitialgenesisoftheGlobalFinancialCrisis(GFC)duetodecreasinglendingstandardandincreasingmortgagedebt.Whenthisloanstarteddefaulting,thesecuritizedassets,mortgage-backsecuritiesandcollateralized-debtobligation,wereextremelyadverselyaffected.Financialinstitutionsandretailinvestorscriticallysufferedfromthisinvestment.
Furthermore,theglobalfinancialmarketwasdeteriorated.liquidityinthemarketwasdriedupandinterestrateincreasedsignificantly.ThecollapseofLehmanBrotherstriggeredafull-blownfinancialcrisiswhichleadstothenear-collapseofAmericanInsuranceGroup,andUScarmanufacturer.USgovernment,BritishgovernmentandEurounionsteppeduptobailoutsbanksfacingdifficulties.Theworldtradeandunemploymentrateplummetedandincreaseddramatically.
UnliketheGFC,EuropeanDebtCrisiswasstartedbytheimbalancedeconomicdevelopmentamongEUmemberstatesandtheinterestconflictbetweenmainpolicymakersandindebtcountries.Asinglecountry’sfinancialshockincertainassetclassspilledoverrelatedstatesthencausedliquiditycrisisinEUcountries.ThecurrentEuropeanDebtCrisisdidnotinfluenceAustralianeconomyandfinancialsystemsignificantly,duetotherewaslessdirectcorrelationbetweenAustraliaandEUcountries.Butchangesininterestrateandcapitaloutflowhaveraisedtheissueoncostoffunding,interestrateriskmanagement,liquidityriskandexchangeraterisk.DuetoAustralianbanks’longhistoryinrelyingonoffshoreborrowing,wideningfundingsourcesandmanagingcostsaretheprimaryissuesforAustraliangovernmentandbanks.
Contents
1.Introduction1
1.1BackgroundInformation1
2.GFCandItsImpactuponAustralianBankingSystem1
2.1TheGenesisoftheGFC1
2.2ThecatastropheoftheGFC3
2.3Australianexperienceinbankingindustry7
3.EuropeanDebtCrisis10
3.1TheGenesisEuropeanDebtCrisis10
3.1.1ImbalancedEconomicDevelopment10
3.1.2TheConflictbetweenPolicymakersandMemberStates12
3.1.3LiquidityCrisis12
3.2EuropeanDebtCrisisInfluencesonAustralianBankingSystem14
3.2.1ChangesinInterestRateandFundingCost14
3.2.2CapitalOutflowandLiquidityRisk15
3.2.3OtherRelativeInfluences16
3.3Recommendations17
4.Conclusion18
References20
ListofFigures
Figure1:
USMBSIssuance2
Figure2:
Sub-primeLendingStandards2
Figure3:
USMortgageDebt3
Figure4:
3-monthLIBORtoSwapSpread4
Figure5:
Bank’sprofit5
Figure6:
U.S.Unemploymentrate6
Figure7:
ShortTermInterestRateSpread7
Figure8:
BankingSectorLiquidityDemand8
Figure9:
AustralianExchangerate8
Figure10:
AustralianCorporateBondSpread9
Figure11:
MacroeconomicindicatorsPIIGS(2007-09)11
Figure12:
10yeargovernmentbondyields13
Figure13:
PricesforCDS14
Figure14:
DifferencebetweenthecostoffundsandtheRBAcashratesinceGFC15
Figure15:
ExchangerateAUD/EUR2008-201217
1.Introduction
1.1BackgroundInformation
TheGlobalFinancialCrisis(GFC)wasbuiltupbysubprimeloanwhichsubsequentlywassecuritized.Thesecuritizedproductsgeneratedtremendouslosstoinvestorsandfinancialinstitutionswhichwenttobustwhentheloandefault.Thisleadstoextremecontractionofworldeconomy.EuropeDebtCrisisthenstartedlaterduetoover-spendingandlowtaxincomeingovernmentbudget.GreeceisgenesisofthiscrisiswhichspilledovertoPortugal,ItalyandSpain.FranceandGermanyaretryingtoshorethemupfromtheturmoil.Australianbankingindustryalsosufferedfromthesecrisesincertaindegreeduetointer-connectionoffinancialmarket.
2.GFCandtheimpactuponAustralianbankingindustry
2.1ThegenesisoftheGFC
AvailabilityofcheapcreditwasthefirststepofaccumulatingriskstowardtheGFC(Ellis,2009).Chinaandothercountrieswhichhadcurrentaccountsurplushadinvestedalmosttheirsavingsintorisk-freegovernmentbond,especiallyinadvancedcountries.ThesefundswerethereforerecycledintoUSgovernmentsecuritiesandotherlower-riskassetswhichsubsequentlydepressedtheiryieldandencourageothermarketparticipantstolookforhigheryield,alsohigherrisk(El-Agraa,2011).Also,Bernankearguedthatthis“globalsavingglut”wasafactorthatboostedtheassetpriceinmarketssuchasstockmarketandhousingmarket,especiallyintheU.S.A.duetocheapfundingandlookingforgoodinvestmentopportunities(Jones,2009;
Sholarin,2010).
USmortgagemarkettookthemostadvantageofsuchlowinterestrate,sotheformerwasrefinancedinahugenumberanddramaticallyimproved.However,whenthebusinessstarteddrying-upandtheinterestratestartedtoriseagain,theUSmortgagelenderswentthroughsub-primesegment,highlyrisky,ascommonlyknownas“NINJAgroup”.Thegraphbelowshowsthesignificantincreaseinsubprimemortgageloanduring2002to2006.
USMBSIssuance
Source:
ReservebankokAustralia(RBA)
Areasonthatbooststhesubprimesegmentwastoeasethelendingstandard.Thegraphbelowshowsthatalow-docloanincreasescontinuously,whiletherepaymenttoincomerateslightlyrose.Thesethereforeleadtoveryhighloan-to-valuationratio.
Sub-primeLendingStandards
RBA
Asaresult,theleveragewentupinthoselasttwoyears,reaching45%in2006,duetoriskappetite,referringtographbelow(Ellis,2009).ThiscanimplythatAmericansheldlittleequityintheirhomesinthetimeofthepeak,booming.Inevitably,thesewouldcreateaverytremendousissuewhentheUShousingpricestartedtogodown.
USMortgageDebt
Also,theasset-backedcommercialpapermarketandleveragedloanmarket,leveragedbuyoutactivity,expandedsignificantly,particularlyinNorthAmericaandEurope.Withrespecttothemortgagemarket,theseexcessesexacerbatedthefinancingstructureswhichbecameopaque,andtheriskswereunderestimated.
2.2ThecatastropheoftheGFC
WhentheFederalReserveraiseditsinterestratefrom1.25%to5.25%,betweenMay2004andMay2006,duetoabigconcernofinflation.Thehousingmarketwasaffectadverselyenormouslybysuchincreaseastheborrowingbecamehugelycostly.Someborrowerssubsequentlydefaulted.
Moreimportantly,asset-backsecurities(ABS)comprisingsubprimeloanweresoldtonotonlyinvestorsbutalsofinancialinstitutions.Thus,suchlosswentthroughanypersonholdingtheABS,sotheidealofmitigationofrisksfromthisproducthasnotbeenexistedanymore.Marketparticipantsstartedtoconcernthathowmuchtheircounterpartieslost.Combiningwithlossannouncementandsuspensionssomebanks-sponsoredinvestmentfundinmid-2007,theliquidityinthemarketwasdriedup.Theinterbankratestartedtowiden.Additionally,notonlythedemandofABSwasdriedupbutalsothelendersfoundthemselvesthatitwasverydifficulttorefinance.Graphbelowshowsthehugejumpofthe3-monthLIBORtoSwapSpreadshowingfearsinthemarket.
3-monthLIBORtoSwapSpread
Subsequently,banks’profitsdramaticallyplummet,asshowningraphbelow.BearSternswasafirstinvestmentfirmbailedoutduetohugelossandliquidityproblem.ThisleadstoanacquisitionbyJPMorgan.Banksbecamerisk-averse,andthelossofconfidencespilledovertotheGovernment-SponsoredEnterprises(GSEs),FannieMaeandFreddieMac.AlthoughthesetwoinstitutionswereimplicitlyguaranteedbytheU.S.government,theywerenationalizedduetoexcessiveinvestmentinABSandcollateralized-debtobligation(CDO)(Akinbami,2010).
Bank’sprofit
LehmanBrothershadplayedavitalroleinthefinancialmarketsasitstotalassetwasthefourthlargestintheU.S.financialinstitution.However,Lehmanwenttobustasitdisclosedtremendouslossesonitsinvestmentincludingsubprimemortgage,ABSandCDOs.Thisbankruptcyseverelydeterioratedthemarketconfidenceasittriggeredthefull-blownsystematicfinancialcrisisspillingovertheglobalfinancialmarket.Asaresult,theyieldspreadofriskyassetsincludingderivativesandsecuritiessuchascreditdefaultswap(CDS)andCDOalsomarkedlywiden.
Atthatpointintime,acreditratingofsecuritizedproductsandderivativessuchasCDSweredowngradedbythecreditr
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