Who murdered the Financial System?

Today, as I was going through the pages of Indian English Daily Times of India, I came across an article, the heading of the article was "Who murdered the Financial System? The article discussed about the people responsible for the such a financial mayhem.

Here find the synopsis of the article.

According to TOI, everyone from makers to consumers to regulators were responsible , but they narrow down there list to 10 murderers of US financial system.

1. Federal Reserve Board : They were responsible for forming bubble economy, and did not notice it when the bubble was on the verge of a bust.

2. US Politicians : They envisioned a house for every American, regardless of their income, and formed unregulated govt. agencies Freddie Mac and Fannie Mae, which disbursed loans like anything.

3. Fannie Mae and Freddie Mac : They resisted regulation, and spent over 2million$ lobbying legislators against any tightening of rules.

4. Financial Innovators : Financial Engineers working at the Wall street, created new structured products backed by subprime mortgages and sold to investors.

5. Regulators : Everybody in the financial markets were sleeping and no body cared to check the worthiness of the CDO's.

6. Banks and mortgage lenders : Instead of keeping the mortgages at their own books, lenders packaged it into security and sold it to other financial players and increase their liquidity, which results in more lending and vice versa. Besides, banks were busy on giving loans to people without checking their financial capabilities, which added fuel to fire in the financial crisis.

7. Investment Banks : Once these financial institutions provided services like underwriting, M&A, IPOs etc. But recently they started borrowing money to trade into their accounts.

8. Rating Agency : They offered ratings which were inappropriate for some of the financial instruments available in the market.

9. Basel Rule for Banks :

10. US consumers : Some times ago, US households savings were 6% of the disposable income, but now its either zero or negative. They have gone on a borrowing spree to spend far more than they earn.

10. Asian and Opec Counties : They undervalued their currency to simulate exports to US markets. They accumulated billions of forex US dollar reserves and put them into dollar securites, thus depressing the US interest rates and increased borrowing.

source, TOI

Thanks&Regards,
Mohit

Impact on Indian economy with Lehman and Merrill Fall

Its often said when US sneezes everybody in the World catches the cold. So how come India be kept aloof with latest financial turbulence in the US economy. Indian economy will certainly be impacted by this financial crisis. Some of the sectors which will affected are :

1. Stock Market : With the Chapter 11 bankruptcy filed up by Lehman Brothers and Merrill Lynch bail out by BOA, FII have also started pulling out their money from the Indian Capital Markets. The trend will certainly continue till the financial scenario become much more stable.

2. Tourism : US citizens posed the major chunks of foreign tourists in India. With people loosing their jobs, inflation at all time high, and the improvement in US economy seems to be distant dream for everybody in US. With such kind of gloomy environment,people like to save their money rather than spending on vacation, which certainly affect the Indian Tourism Industry.

3.IT /ITeS Industry : For most of the Indian IT behemoth US is still the biggest revenue grosser, of which BFSI holds the greatest pie. As 9 out of 10 major Investment banks already posed huge amount of looses, which resulted in the cut of their IT budget, the end result no new bidding , even existing IT project are on hold or in pipeline, such kind of negative sentiments led to gloomy atmosphere in the IT space of the country.

4. Finance Industry : With the globalization of Indian economy, there is not only inflows of capital but outflows also. Some of the major banks in India did had some exposure in this ailing financial units. For e.g. India largest private bank ICICI Bank hold a 80million$ positions in Lehman Bonds.

5. Education : Even the Indian education system did not keep itself aloof from the recent fall of these financial institutions. The students of the Indian premier management Institutes IIM and ISB, who already accepted Pre-Placement Offers (PPO) from Lehman Brothers and Merill Lynch, now find the offers useless and have to look for different oppurtunity elsewhere.

Thanks&Regards,
Mohit

Leveraging of Web2.0 in Banking/Financial Vertical

Launch of Web 2.0 totally change how web works, how it operates and how it can influences every bodies life. In layman terms, Web 2.0 empowers the END-USER to create and publish its own content, which can be used by other communities or groups on Web. The thriving Web 2.0 applications like blogging, video publishing, bookmarking , social networking etc. have given technology user an edge to express one thoughts and share them with the outer world.

But the question is, How Web 2.0 platform can be leverage for Banking and Financial Industry ?
The question is quite tricky, as Web 2.0 is more user itself, so how can be used by the an Industry which run on some pre-defined set of rules and standards. Let's explore this issue little bit, and segregate Web 2.0 platform based on the application supported by this platform.

1. Blogging : Blogging provides a platform for a user to express his thoughts, it also provide a platform to bring together all like minded people, actually thinking about the similar thoughts.

Now the question is, How blogging can be useful to Banking and Financial industry?
Banking Industry has numerous financial products, normally the knowledge of the products lies with the sector who launches or maintains the product. In order to make their product more competent and more risk averse, the bank should try to spread as much as knowledge about that product to its employess, so that the involvement of large section of intellectual people may make the product more rewarding to the client of the bank. This can be possible, if bank try to implement somekind of intra blogging concept, where people can discuss about their products, their prcing mechanism, advt. strategies etc. and at the same time expect comments and advice from their colleagues.

2. Maps : Every other day, google comes with its newer version of Google Maps. Where it not only provides a comprehensive data of city locations and paths, but its also empowers users to edit and add information about their locations. Now how banks can leverage this technology to their benefits ?
Now the kind of business the banking industry does is changing, now client does not go to banks, but banks come to clients. In order to make sure the bank and its services are accessible, the banks should provide efficient way to reach that services. For e.g. nowadays every banks has large number of ATM machine, they can be widespread throughout the city. Bank should provide detailed information about the ATM location, its accessibility, information about nearby places etc.

3. Social Networking : Social Networking sites are flourishing very fast in Web 2.0 space, sites like Facebook, My Space, Orkut etc. are a big hit among the consumers especially the youth. Banking industry can try to formulate such a platform, where like minded intellectual consumers can come , make friends, discuss about the bank's financial product offering, it's short term and long term benefit. They may also involve in putting ideas in improving the current product . Thus involving consumers directly in developing a financial product and getting their response for the existing products.

The main reason of Banking industry still did not leverage for Web 2.0, it's may be due to security and customer secrecy concerns. But as Web2.0 platform become more standardized and secure proof, no bank stalwart will hesitate to use this platform in their favor. Hope to see more use of Web 2.0 in banking and financial industry.

Thanks&Regards,
Mohit Kumar