Banking Crisis

A typical banking crises has revised itself throughout the history, prominent examples include the bank run that occurred during the Great Depression, the U.S. Savings and Loan crisis in the 1980s and early 1990s, the Japanese banking crisis during the 1990s, and the subprime mortgage crisis in the 2000s, and the latest one Banking Crises 2008.

 Top tips to avoid the banking crisis affecting your business

• By strengthening market discipline.
• By holding more capital and liquidity reserves, including putting extra money aside in good times.
• Improving management of risk within the financial system as a whole.
• If your major selling product are necessity goods, there is less chance of being affected by a banking crises. As necessity goods have higher Cash flow and lower rate of costs.
• For loan purposes, business should not only dependent on banking sector, as there are other financial institutions may provide better considerations.
• Business size and structure must be reviewed and limited.

In a financial crisis, banks stop lending to customers and also each other. This is because of mistrust among the banks which has resulted in a lack of liquidity. This is not going to help you as an individual business holder or small scale business man. It is also noted that Banks are forcing individuals to accept higher interest rates by coercion, some credit cards now have interest rates as high as 56%, when they were at just 17% some 3 years ago.

A banking crises reduces the value of the Pound versus the US Dollar, the Euro and the Japanese Yen, and also the purchasing power currency goes down. There are two ways in which this will affect you: sooner or later rising inflation will wear down your net worth, which may affect your net profit.

How long does a banking crisis last?

No one can say for sure, the upturn will start with positive forecasts coming from policymakers around the globe. As it is predicted by the U.S. administration, that growth will renew at the end of this year and continue at a vigorous velocity of 4 percent for a number of years afterward. Is this really the truth or just wishful thinking?

If someone carefully analyses the international evidence on the severe banking crises, you will see we are from out of it. The decline which caused a large financial crisis is likely to last far longer than normal downturns, and is expected to cause more damage. If the United States pursues the norm of crises, as it has until now, it may take time and output of up to four years to return to its original state of pre-crisis level. Unemployment is likely to increase for three more years; it may reach 11–12 percent in 2011.

What can I do to help my business in a banking crisis? 

Under these circumstances, there are two strategies that businesses can conceivably take:

1. Attempt to get support from governments.
2. To really save a company, businesses have to take the initiative. Your business has to take a leadership role, be proactive and plant the seeds for future growth to ride out the current banking crisis.