Economical crisis facing the banking Industry Essay

Economical crisis facing the banking Industry - Essay Example However, some revenue comes from banking charges among other sources. The banking sector has developed due to some favorable factors like increase in population, hence customers, Good interest rates as stipulated by the central bank, improved security, advanced banking technologies and increase in banking professionals among other factors (Morr 2009). However, the same sector is compromised by some economic factors like the global financial crisis, increased unemployment rates and unstable interest rates among other factors. This work focuses on some of the economic crisis facing the banking industry. Different types of banking have different economical challenges. This work will consider both the retail and the mobile banking systems. The financial crisis is one of the major limitations facing the banking industry. It is defined as a situation where a certain banking institution in not in a capacity to run its operations due to lack of sufficient funds. Financial crises come in diff erent forms, for instance, currency crises, where there is insufficient currency in a certain nation (Angelides 2011). Here the banking institutions are forced to operate in different currencies which might be expensive in the long run. Bank crisis on the other hand applies if a certain bank has insufficient funds to lend its customers and pay its employees among other statutory obligations. Then there is the twin crisis which is a combination of currency and bank crises. Currency crises may result from unfavorable internal or external factors. A calamity or disaster like war and earthquake is likely to limit internal business operations which may lead to fall of economy in that nation. The country will have to pay more for its imports and this could lead to reduced currency. Cutting ties with super power nations like U.S may also compromise the strength of a certain currency. Bank crises on the other hand, are subject of both micro and macroeconomic elements. A bank is likely to la ck sufficient funds to perform its obligations due to bankruptcy, business merges; this is a scenario where a bank loses its business control on forming partnership with another business entity, or nationalizing the entire banking sector or a section. Global financial crisis left some huge France and U.S banks with suspended bonds due to incapability to do the valuations due to the frozen market. The banking default levels increased and this hiked the interest rates by an estimate of 5%. Global financial crisis (2007) limited the operations of the banking sector. The U.S legislators through President George W. Bush authorized financial institutions to provide some unsecured loans to the U.S citizens who wished to construct their own residential facilities. The problem arose when the citizens or real estate sectors failed to repay the loans (loan defaulters). The crisis affected the banking sector on a global scale. Although the government directed some state funds to settle the loan s, the financial facilities adopted some strategies to recover such loans. The central bank hiked interest rates for more revenues (Proctor 2000). This had some negative implications with the banking customers. Several agencies and businesses stopped operations waiting the interest rates to fall. Some opted to seek financial assistances from a micro - finance industry whose interest rates were not greatly affected. The crisis made some financial institutions close their operations for the lack of adequate finances. The banks had insufficient funds to loan its customers and even pay the employees. President Bush ordered for a committee comprising chief economists and financial managers to suggest for