Marketing

Role and responsibilities of financial institutions in the past and today

Financial Institutions in the past generally served as money lenders. It wasn’t till the twentieth century that with the onset of modern industry in the country, the need for government regulated banking system was felt. It was then Governments began to pay attention towards the need for an organised banking sector. The modern day financial institution plays a similar but wider and broader roles and larger responsibilities than the past. Banking system and the Financial Institutions now plays a very significant role in the economy. First and foremost is in the form of catering to the need of credit for all the sections of society. The modern economies in the world have developed primarily by making best use of the credit availability in their systems.

Financial Institutions now exercise can have considerable influence over most areas of economic activity and can respond quickly to new opportunities. In conclusion, Banks and financial intuitions play a major role in the economic development of any country by providing credit availability.

Role and consequence of rating agencies in the credit evaluation of these collateral debts obligations.

The role of Credit rating agencies is to provide global investors with an informed analysis of the risk associated with debt securities. The riskiness of investing in these securities is determined by the likelihood that the debt issuer be it a corporation, bank-created entity, sovereign nation, or local government--will fail to make timely interest payments on the debt.

Hence should the rating agencies evaluation goes awry, losses may be incurred by lenders who lend to customers with poor credit ratings which are evaluated as to having good credit rating based on the evaluation of the agencies. Hence lender will lose money when the borrower defaults.

Major Causes of the sub prime crisis

The sub- prime crisis began when there are changes in the...