Issue 1
Sub prime mortgage loan
The immediate and main cause of the current financial crisis is the booming of the United States housing market, which took place between the years 2005-2006 (see appendix 7 form more details).
Failure to pay the “sub prime” was very high, and starts to increase rapidly. Most banks gives borrowers easy facilities and incentives like long-term trend of rising the price of housing which had give borrowers the confidence that they will be able to quickly refinance at an excellent terms.
Refinancing became more difficult after the rise of the interest rates and the drop of the housing prices between 2006-2007.
It is visible that UAE (See appendix 4 for more details) starts to feature financial problems as much as the rest of the world.
The Central Bank in UAE during early eighties implemented a law challenged to limit exposure to the real estate sector. This law stated that banks that are operating in the domestic market would be allowed to lend only 20% domestic deposits for the purchase and development of a land. As a result, new developers in UAE found it very difficult to obtain finance for their new projects as banks are on the edge of Reaching the authorized limit of 20% on funding to real estate.
Consumer behavior is shifting with the current boom and many of the banks wish that this law would reverse. This law still existing but not cancelled; and lenders as a result become more selective.
People in general have ignored the risk involved in taking out loans. Most of them did not prepare a plan to finance their properties, ignoring that the original amount, which was borrowed, would grow by time, which resulted in facing debt problems.
Issue 2
The world financial market was shocked from Dubai’s debt crises, with increasing concern that some UAE banks tighten lending and stall the recovery of global economy.
UAE banks need to feel confident about lending to continue with its economic strength. The troubles that Dubai face caught investors by surprise. And after one year the global crash disrupt the city effecting the growht in ints main investment arm and was seeking six-month delay on repaying its $60 billion debt. The responses from the credit agencies was cutting debt ratings on the state companies of Dubai because they may consider the plan a default.
Wednesday, May 26, 2010
Introduction
During the year 2008, American financial centers were hit with a series of bankruptcies that take most experts by surprise. These crises were part of an outline of economic fail which includes sub prime crises and the decline and reject of the real estate bubble
The sub prime mortgage loans lost banks trillions of dollars during the year 2007. “sub prime” is used to describe the practices used by different banks in giving people loans with bad debt histories and limited borrowing experiences.
As a result, a huge number of borrowers fail to pay their loans leaving banks with maximum losses that couldn’t be closed out.
As the financial crisis rapidly spreads around the world, UAE was selected in specific, due to the fact that the economy in this country slowed unexpectedly.
Talking about UAE crises in specific was a great challenge, due to the difficulties in finding the serious people to contribute in answering the required survey and give their feed on the current financial situation in UAE and how this issue affect them and will affect them in the long run.
I will arguer on the importance of the importance of financial awareness and financial education required to assist people in their financial decision.
In UAE it is debatable whether there was a delay in recognizing the seriousness of the crisis. But it seems that the governments and central banks in the country responded appropriately to this challenge.
Some of the information was supported by the alarabiya new channel articles which helped to give an over view of the current crises in UAE.
To conclude an interview will be conducted with Abu Dhabi Commercial Bank and a survey questionnaire will be distributed to targeted people to have their feed back on the effect of the crises on them.
During the year 2008, American financial centers were hit with a series of bankruptcies that take most experts by surprise. These crises were part of an outline of economic fail which includes sub prime crises and the decline and reject of the real estate bubble
The sub prime mortgage loans lost banks trillions of dollars during the year 2007. “sub prime” is used to describe the practices used by different banks in giving people loans with bad debt histories and limited borrowing experiences.
As a result, a huge number of borrowers fail to pay their loans leaving banks with maximum losses that couldn’t be closed out.
As the financial crisis rapidly spreads around the world, UAE was selected in specific, due to the fact that the economy in this country slowed unexpectedly.
Talking about UAE crises in specific was a great challenge, due to the difficulties in finding the serious people to contribute in answering the required survey and give their feed on the current financial situation in UAE and how this issue affect them and will affect them in the long run.
I will arguer on the importance of the importance of financial awareness and financial education required to assist people in their financial decision.
In UAE it is debatable whether there was a delay in recognizing the seriousness of the crisis. But it seems that the governments and central banks in the country responded appropriately to this challenge.
Some of the information was supported by the alarabiya new channel articles which helped to give an over view of the current crises in UAE.
To conclude an interview will be conducted with Abu Dhabi Commercial Bank and a survey questionnaire will be distributed to targeted people to have their feed back on the effect of the crises on them.
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