Global banks and local crisis

Insofar as our title is concerned global banks and local crisis are directly related and need to be defined in our study. A bank refers to a financial institution which has the primary activity of acting as payment agent for customers and to borrow and lend money. Global banking is a term synonymously used to mean a financial institution not limited or provincial in scope i. e. a bank involving the entire earth or rather a large area. Local is a smaller area and crisis refers to a situation which is not stable of extreme danger or difficulty.

When we critically look at how these two words are related we need to base our study on how factors like food shortage, price increase and how natural calamites which create a crisis affect the banks lending, borrowing and doing other transactions in the entire earth. (Gearoid, 1998) Discussion The overall discussion leads us to raise three fundamental Questions: • What really is the strong connection between local crisis and global banking? • Is the global bank a subject of the local crisis in the current societies in the world?

• Is the recent shortage of changes of prices of food and oil in the local societies a contribution to the global banking? Food prices continue to top in the subject of our discussion which its trend has been very systematic in the 21st century. Unreasonable droughts have been the main cause of price hikes especially in 2006 where the grain-producing nations and oil-producing countries contributed a lot. Oil prices made the cost of fertilizers, transport of food and agriculture industries go high, all these had a negative impact on the banking industry in the global world.

Other causes include increased use of biofuels in the developed countries and the increasing demand for more improved diet in the expanding middle class people. These factors together with world food stockpiles fall have all have contributed to the crisis of food prices which in the other hand affects global banking. (Gearoid, 1998) Crisis in the banks globally has been created since banks are normally susceptible to risks like liquidity risk i. e.

the risk that many depositors will request withdrawals beyond the available funds in their accounts and these may transfer to the global banks in that one bank in a particular country may borrow from other banks thus creating liquidity crisis in the global world, other risks like credit risks i. e. the risk that those who owe money to the bank will repay and also risks of interest rate risks i. e. the risks that the bank will become unprofitable if rising interest rates force it to repay relatively more on its deposits than it receives on its loans. Liquidation makes banks globally liquidated e.

g. the U. S. savings and loan crisis in 1980’s and early 1990’s and to much extends this has created a bank run leading to great depression. (Gearoid, 1998) Some commentators have argue that the rapid population growth has dramatically dropped since most countries have adopted the methods of family planning to plan there families especially in the 1980’s but I disagree since statistics show that world population has grown from 1. 6 million to 6. 6 billion today since the 1900 to date. This has been contributed by some individual local countries which contribute to the large population growth.

This has made the global banks to change their mode of operations and today we have the use of electronic banking banking which has easen the work of serving the large population. (Gearoid, 1998) Conclusion Generally the factors which have been discussed above are the major local crisis which has lead to the global banking revolution but we have factors which stem from these factors and they include impact of petroleum prices, declining world food stockpiles, financial speculation, and impact of trade liberation and they have also contributed to the global banking change. Reference: Gearoid O T (1998) Global economic: Routledge