Question

2.It is suggested as we studied in previous chapters that banks are struggling to maintain their market in the financial services sector. What do think is behind this trend?

What kind of banking and financial system do you foresee for the future if present trends continue?

Instructions:

Answer the above two questions and make sure that:

1. You use your own words as any plagiarism will be captured by the software and rejected

2. You don’t share your answers with anyone as that might jeopardize your grade

3. You submit on the due as late submissions will not be entertained

Answer 1

The global recession is indeed nearing. The recent trends such as economic lock downs and the fact that most banks are encountering serious issues of liabilities rising and Non-Profit Assets growing, the industry is soon to see a big issue.

The demand for products and services across the globe is steadily declining due to various issues. This is leading to lesser generation of capital for banks as loans are no longer demanded by the industry and consumers. Further, with bad loans rising to all-time highs, the problem may get even worse from here.

Thus, the core reason for the financial services sector to decline is the fact that the entire world economy is going through a recession primarily caused by the Corona Virus Lock downs and other similar causes which have declined market demand on one hand and on the other have made companies vulnerable and unable to pay off debts.

As a result of the inability to pay debts, banks are also currently not able to recover their money in most cases which has led to a dead lock of sorts.

In the current scenario, the need of the hour is for government to relax norms and allow for easier lending for banks and provide stimulus packages to the financial sector which is the back bone for any economy. This can be done by deferring loan payments, providing direct support to banks through buyout of bonds, reducing the interest rates for deposits which are charged from banks by the federal reserve among others.

It is only through these relaxation practices that banks would be able to have more money in their hands which may help them in lending and earning more and keeping the demand and supply of money to an equilibrium position respectively.

Please feel free to ask your doubts in the comments section.