Regulatory Response to the Financial Crisis which began in 2007 Essay

Regulatory Response to the Financial Crisis which began in 2007 - Essay Example 1). The debate still rages as to the real cause of the crisis. King (2011, p. 48) indicates that a major contributor to the global crisis was global imbalances which requires rebalancing of global demand in order to facilitate a sustainable recovery. This paper provides a brief synopsis of the events and the regulations which followed in the US, Germany, UK, Netherlands and Spain. According to Blundell-Wignall and Atkinson (2010, p. 2) every banking crisis has been associated with major disruptions as well as recessions and this is the reason for certain bank regulations. New regulatory responses are generated by every global financial crisis (Helleiner 2010). This was no different for the crisis which started in 2007 resulting in what has been described as ‘the Great Recession.’ Regulatory Response in the United States According to the U.S. Senate Republican Policy Committee (2010) a multitude of events led to the Great Recession of 2008-2009. They include the housing b ubble which was caused by cheap credit made to persons who would not qualify for a loan under normal circumstances; low interest rates; failure of regulatory agencies; and inflated rating grades provided by credit rating agencies. In order to mitigate the crisis United States government introduced what they described as Targeted Asset Relief Program (TARP) and the Temporary Liquidity Guarantee Program (TLGP) – (Eubanks 2010b, p. 2). The TARP was later expanded to include automobile companies such as GM and Chrysler (U.S. Senate Republican Policy Committee 2010). A number of regulatory proposals were put forward in relation to consumer protection, modernisation of the regulatory system and restoring stability (Eubanks 2010a). These led to the Dodd-Frank Wall Street Reform and Consumer Protection Act of July 2010 and a consolidation of the regulatory bodies. The objective of the act is to â€Å"create a sound economic foundation to grow jobs, protect consumers, rein in Wall St reet and big bonuses, end bailouts and too big to fail, prevent another financial crisis†. According to Lo (2009, p. 27) there has been a recent proposal to suspend Fair-Value – FASB Statement No. 157. Fair-value or mark-to-market accounting requires the valuations of firms’ asset at fair market prices and not on a historical cost basis. The practice which has forced a number of firms to write down their assets and thus triggering defaults and insolvencies has been blamed for the financial crisis. Regulatory Response in Germany In Germany the single regulator of financial services – the German Financial Supervisory Authority which was established in 2002 in order to improve stability and integrity in the German financial system had its regulatory authority greatly increased in 2009. This was done in order to improve its capacity to manage the financial crisis. The act for strengthening the financial market and insurance supervision became effective on Augu st 1, 2009 (Eubanks 2010b). This act was a measure which had the objective of increasing the preventative, supervisory and intervening powers of this regulatory authority. The act also facilitated the strengthening of informational and reporting requirements for financial institutions, insurance companies

Airline Deregulation Essay Example | Topics and Well Written Essays - 750 words

Airline Deregulation - Essay Example Although the different airlines were competing on different levels the major airlines Delta, American and United airlines adopted the hub- and spoke system that entailed a shift in the route structure, so as to increase their bargaining power as a supplier. The intensity of competitive rivalry Competition between airlines are increased as more and more airlines joined the market ever since.The impact of the five components consists, Entry of new airlines This made the customers enjoy low pricing from the different carriers, making customers have a variety of airlines to choose from increasing the quality of services from the airlines. The major airlines had to do product differentiation so as to keep their clientele base by opting for a method called the hub. The government had to do a distribution in the routing of the airlines so as not to affect the original Airbus so much making adjustments in who the carriers should operate to what destinations. Due to the competition that the d eregulation enforced on the airlines, the major carriers opted for this FFP’s loyalty strategy. This was a way to win the trust and loyalty of their customers and to maintain their clientele base, they were rewarding their customer's free flights, if there could frequently be flying in their bus, this strategy brought about loyalty that was necessary to keep the hub operation going. Such products were able to put the big air companies on the market, increased their customer base and ensured sustainability of their business.