In this video, David explains the 2023 banking crisis's impact compared to the 2008 financial crisis. He discusses the reasons behind the limited market confidence restoration from the 2008 bailout and why banks were unprepared.
In this video, David explains the 2023 banking crisis's impact compared to the 2008 financial crisis. He discusses the reasons behind the limited market confidence restoration from the 2008 bailout and why banks were unprepared.
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17 mins 28 secs
The 2023 banking crisis' impact was less severe than the 2008 financial crisis due to the lessons learned. The 2008 bailout hastily stabilised banks without fully restoring market confidence, prompting measures like quantitative easing. It was partially caused by Lemon Theory applying to the mortgage market, creating a wave of 'lemon' mortgages. The 2023 crisis, on the other hand, was met with regulatory provisions for loss-absorbing equity and planned resolutions. Despite Credit Suisse's strong finances, a confidence crisis forced a UBS takeover, highlighting the importance of robust regulatory frameworks. It showed that crises of confidence can rival financial insolvency in destructiveness, underscoring the need for vigilant oversight.
Key learning objectives:
Understand how the 2008 bailout package stabilised the system but failed to restore full market confidence
Understand why banks were so underprepared in 2008
Understand how lemon mortgages contributed to the 2008 financial crisis
Understand the cause of the banking crisis at the start of 2023
Outline how developments within financial regulation prevented a financial meltdown in 2023
Access this and all of the content on our platform by signing up for a 14-day free trial.
Access this and all of the content on our platform by signing up for a 14-day free trial.
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