Principles of Banking and Finance - 1898 Words

What does Sub-Prime Crisis means? Sub Prime lending which is also known as near-prime, non-prime and second chance lending, means lending to people who might have trouble repaying the loan due to income ability or credit ratings which previously would not have been available to them. Credit ratings that might be not favorable to them with the standards set up initially by Financial Institutions slowly dwindle to less strict under-writing of loans. which could also due to an influx of foreign capital making lending easier to these group of people, the investment banks that sold the repackage mortgages to the consumers which is one of the way to fund for capital, and the Housing Urban Development of America policy to ensure that its†¦show more content†¦If there are not to give favorable ratings to these products they risk the underwriter of these securities to another rating agency. It would be hard to sell these products if they are not being given a rating to begin with. O nce they are sold the banks have in a way diverted part of the risk to the consumers. Investors should not rely too heavily on these ratings agencies opinions but instead carry out their own homework in the safeness of debt level as well as others related securities. Probably the opinions of the agencies enable them to get a conclusion, however based on past decade of event, it can only be consider as off base when it comes to the risk of credit event. Investors should try to put themselves in the shoes of the product pushers, asking themselves very important points like, why do you need to sell these products? Do you own any of these products yourself? If it is as good as you mention have the private investors bought and participated a substantial amount of their savings in it? Perhaps there need to be some form of intermediaries whereby no conflict of interest will affect their opinion and report of these products. A case study in Singapore itself which has made headlines during this crisis was the minibond saga which was being sold in Singapore by a couple of Financial Institutions. The originator of this series of structured products was theShow MoreRelatedConcepts of Islamic Finance Essay882 Words   |  4 Pages Islamic finance is the system that practicing financial services according to the principles and rules of the Islamic commercial jurisprudence. It is a system that operates the services based on Islamic law which is called shari’ah which is based on Al-Quran and Sunnah. The objective of the Islamic finance is maximizing profit by minimizing loss but at the same time taking consideration on the welfare (maslahah). In Islamic finance, it is prohibited from any payment which is over and above theRead MoreCustomer Relationship Management ( Crm ) Practices805 Words   |  4 Pagesin the banking sector as well as, in the National economy. 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