Sub-prime Crisis Ppt

•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 INSTITUTION

RMBS

SECURITISATION

PROCEEDS

SALE of LOAN

SUB-PRIME LENDER

CDO LOWEST RISK / HIGHEST RATING ( SENIOR ) MEDIUM RISK ( MEZZANINE ) HIGHEST RISK / ( EQUITY ) 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