What credit crisis?
The credit crisis is a term used in the banking industry to describe the economic situation in which the availability of loans is reduced. The credit crisis usually occurs during the recession, indicating that banking institutions are not willing to take over further credit risk. Corporations and individual consumers can experience this loan. Moreover, the ongoing credit crisis has ripples and can eventually affect the global economy. There may be less confidence in a secured loan due to fluctuation in other markets, such as real estate. In fact, this kind of collapse of market prices is a key contributor to the creation of a credit crisis. Banking institutions can also worry about solvency of other banks and their ability to repay long -term fixed debts. Even the government can play a role in influencing the availability of the loan by imposing a restriction on loan -installation. An unusual level of starting values of a previously issued loan can also reduce the position of the bank and expand another loan. Any or all of these conditions can make it difficult to obtainCredit lines and loans. This increase is often visible in the segment of the loan market first, with an unexpected effect on the conventional rental market that will follow.
TheMortgage Crisis, which began in 2007 in the US mortgage industry, is an excellent example of a credit crisis in action. While the housing market reached its peak in 2005, prices soon fell and continued down the spiral, preventing refinancing. As a result, variable interest rates began to laugh at the current mortgages, although very low rates have been initiated. Given that more and more home owners were unable to fulfill their financial obligations, there were a record number of loans and seizure.
Banks and credit institutions in the US and worldwide have lost billions of dollars and a large number of people have lost their homes. More than 200 banks have been seriously affected in the US, including some of the best creditors such as CounTryle and Washington Mutual. On a global scale, Swiss UBS reported losses that exceeded the loss of other creditors on the world financial market.
Since the credit crisis and recession go hand in hand, it may take years for the economic conditions to improve. Since corporations are unable to increase stocks or working capital, many businesses can become insolvency and forced to liquidate assets. For housing consumers, bankruptcy may be the only way to avoid the closure of the market. Since the availability of credit and credit products remains minimally and at a higher level, there is usually a reduction in investment in business and total consumer expenditure.