[Challenge:Future] Redesigning Financial Industry

[Challenge:Future] Redesigning Financial Industry

• 1.
  Redesigning Financial Industry Collapse of Financial Markets M. Emre Senal Okan Altinkok Izmir University of Economics, Faculty of Economic and Administrative Sciences, Turkey
• 3.
  People have losttheir savings in 2008 Mortgage Crisis. Hunger for more profit among financial industry have increased in the last decades. Financial institutions have taken positions against mortgages (in 2008) and countries (in Eurozone Crisis) by using derivatives. Unregulated derivatives damages global markets.
• 4.
  If risk apetiteis not controlled, financial industry may get out of control. Countries may continue to bill the bailouts to the taxpayers!
• 5.
  When doing businessin Greece become more risky, Institutions buy CDS to hedge their risks. Financial Investments Financial Institutions CDS If risk of Greece increases, Risk Premium of Greece CDS will also increase. This means Institutions make profit by taking position against Greece. Financial Investments Financial Institutions CDS So, Institution which is long on CDS makes money while Greece is collapsing. In the same time, collapse of Greece gains speed. This process was similar in 2008 Mortgage Crisis. It is known that Institutions had taken positions against mortgages in the last financial crisis.
• 6.
  Derivative instruments must be controlled and regulated. A derivative can provide 20 times more profit than other securities Financial Industry must be regulated Assets and (not to be Liabilities of deregulated!), trans financial perancy of institutions transactions must must be be provided, regulated more strictly. Reserve ratios must be increased to avoid bankruptcy of these institutions
• 7.
  Supervisions and Regulationsof Basel Commitee should be expanded if possible. Moreover, If it is needed, even a new path can be found. Government institutions should be strenghten to apply these regulations and supervisions.
• 8.
  By applying regulations and supervisions, financial recovery can be provided in the following decade(s). Costs of crisis may no longer billed to the Taxpayers.
• 9.
  THANK YOU FORYOUR ATTENTION