Analysis of Coursework Feedback

In this feedback, I’ll be analysing and examining ways I could improve my first assignment. I also didn’t go into much detail about government bail-outs and how regulatory initiatives may help evade the risk of a ‘moral hazard’, involving around tax-payer bailouts. I should have talked about the liquidity provisions and BASEL III capital. Then go on to examine the BRRD and concept of ‘bail-ins’, along with more academic articles to help support and develop my arguments.

Firstly, looking at me overall mark for my first assignment, I have mixed feelings as I am neither sad nor exceptionally thrilled with my grade, as I know that I could have improved my grade, if I applied my information and went into depth, along with my statements and given supporting evidence to back up my statements. In my feedback, numerous key words such as ‘…analysis…’ and ‘..examining..’ stood out to me the most, which further supports my statement that if I applied more knowledge to my understanding by demonstrating how my analyses of the TBTF and Moral Hazard, relates to that of the assignment question, and how it is relevant to Deutsche Bank.

I could have also talked about the arguments for and against governments bail-outs by talking about how the bailout will help the global financial stability, by avoiding any financial disasters but instead bring enormously calm atmosphere in a rather hectic economic situation. This will help in protecting the veracity of the financial economy/system. If governments help bailout banks, it will help improve the investments opportunities, within the financial economy and as Warren Buffet perfectly expressed “Yeah, well, it’s everybody’s problem. Unfortunately, the economy is a little like a bathtub. You can’t have cold water in the front and hot water in the back.” We must do this if we all want to avoid an economic collapse, along with the effect it will have on the countries that depend upon their trade. It very important that money must be kept liquidated through the markets to ensure my trade and investments into the financial system. I must also analyse the against factors which include how costly it will be and, credited properties cannot be recovered. It can cause a budget shortage and we can calculate the exact amount that will be helpful for the bailout, or when there will be even be enough money for this action plan to take place.

In my first assignment, I didn’t include the regulatory initiatives and how this will help with the bailouts and that of ‘moral hazard’. As Government bailouts increment moral peril by inducing a business atmosphere in which organisations feel they will be shielded from the outcomes of poor choices and unsafe conduct. Since they no longer dread these outcomes, at any rate not to the level they ought to, they regularly neglect to avoid potential risk to prepare for pointless hazards. This absence of judiciousness as often as possible has extensive repercussions, including shareholder misfortune, indebtedness and disintegration. If they are right and the administration ventures into safeguarding the organization out, the outcomes of this will help benefit the public. Unfortunately, as citizens bear the cost of bailouts, which is likewise to wreak destruction on government spending plans. This is demonstrated in the Great Recession as due to the government bailout during this time, resulted to terrible conduct from the administrators who didn’t treat the citizens well. This is moral risk.

After this examining on ‘Moral Hard’ and government bailouts, I should have gone on to talk about and examine the arguments of Moosa’s on the needs for why banks should be allowed to fail. Such as finding it ironic that regulators are the ones in “sole charge of implementing Basel II and argues that considering the subprime, Basel II may be suggesting inappropriate or inadequate financial supervision.” “While capital adequacy requirements are designed to protect banks from insolvency. As the problem that the banks faced during the crisis illiquidity.”

Basel III is a piece of the persistent impulsion to improve how Banks are managed. It expands on the Basel I and Basel II archives, and tries to enhance the saving money segment’s capacity to manage monetary anxiety, enhance chance administration, and fortify the banks’ straightforwardness. Basel III is to cultivate more noteworthy versatility at the individual bank level with a specific end goal to decrease the danger of framework wide shock factors. Basel III presented more tightly capital necessities in contrast with Basel I and Basel II. Banks’ administrative capital is partitioned into Tier 1 and Tier 2, while Tier 1 is subdivided into Common Equity Tier 1 and extra Tier 1 capital.

Deutsche Bank offers have been pounded, while its adaptable ties have been in freefall. As Nobel Economist Professor Stiglitz said, “The UK has been hit hard because the banks took on enormously large liabilities in foreign currencies. Should the British taxpayers have to lower their standard of living for 20 years to pay off mistakes that benefited a small elite? There is an argument for letting the banks go bust. It may cause turmoil but it will be a cheaper way to deal with this in the end. The British Parliament never offered a blanket guarantee for all liabilities and derivative positions of these banks. The new banks will be more credible once they no longer have these liabilities on their back.”

I would have to agree with Professor Stiglitz statement, as it is fair to say that it’s about time that we set aside, and allow at least one bank become bankrupt. Especially Big Banks, as another round of safeguard outs is unsatisfactory. The general population accounts won’t be able to stand the strain, the effect on the financial economy will be unfair, and the ethical risk would be excessively enormous. If we do see a few banks fall, we ought to be prepared and willing to watch them go down. In my next assignment, I’ll be making sure to go into more depth in examining and analysing the question, as well as backing by my statements with supporting arguments and articles.

Bibliography

Evans-Pritchard A, ‘Let banks fail, says Nobel economist Joseph Stiglitz’ The Telegraph (2 February 2009) <http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4424418/Let-banks-fail-says-Nobel-economist-Joseph-Stiglitz.html> accessed 20 December 2016

Moffatt M, ‘Should banks be allowed to fail? When does a private institution become too big to fail?’ (Education, 25 September 2015) <http://economics.about.com/od/banking/a/bank_failures.htm> accessed 20 December 2016

Investopedia.com, ‘Basel III’ (2010) <http://www.investopedia.com/terms/b/basell-iii.asp> accessed 21 December 2016

Clark A, ‘Banking crisis: Warren Buffett sees US bailout as a golden opportunity’ The Guardian (24 September 2008) <https://www.theguardian.com/business/2008/sep/24/warrenbuffett.wallstreet> accessed 21 December 2016

DePersio G, ‘How do government bailouts increase moral hazard?’ (2015) <http://www.investopedia.com/ask/answers/042715/how-do-government-bailouts-increase-moral-hazard.asp> accessed 26 December 2016

<https://www.macroeconomics.tu-berlin.de/fileadmin/fg124/financial_crises/lecture/14-Moral_Hazard.pdf> accessed 26 December 2016

BBC, ‘Bail-out debate: For and against’ BBC Business (25 September 2008) <http://news.bbc.co.uk/1/hi/business/7635420.stm> accessed 21 December 2016

Moosa IA, Quantification of operational risk under Basel II: The good, bad and ugly: 2008 (Palgrave Macmillan 2008)

Andrew Clark, ‘Banking crisis: Warren Buffett sees US bailout as a golden opportunity’ The Guardian (24 September 2008) <https://www.theguardian.com/business/2008/sep/24/warrenbuffett.wallstreet> accessed 21 December 2016

BBC, ‘Bail-out debate: For and against’ BBC Business (25 September 2008) <http://news.bbc.co.uk/1/hi/business/7635420.stm> accessed 21 December 2016

Imad A. Moosa, Quantification of operational risk under Basel II: The good, bad and ugly: 2008 (Palgrave Macmillan 2008)

Imad A. Moosa, Quantification of operational risk under Basel II: The good, bad and ugly: 2008 (Palgrave Macmillan 2008)

Investopedia.com, ‘Basel III’ (2010) <http://www.investopedia.com/terms/b/basell-iii.asp> accessed 21 December 2016

Ambrose Evans-Pritchard, ‘Let banks fail, says Nobel economist Joseph Stiglitz’ The Telegraph (2 February 2009) <http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4424418/Let-banks-fail-says-Nobel-economist-Joseph-Stiglitz.html> accessed 20 December 2016