Question

In: Finance

During the credit crisis, Barclays decided not to have its “head above the parapet.” Who within...

During the credit crisis, Barclays decided not to have its “head above the parapet.” Who within the firm should have responsibility for making such a decision?

Solutions

Expert Solution

For the given case, credit crisis needs to be understood to some extent to understand the further answer. Bank loans were being given by the lenders at very low interest rates to almost every person in United States and it took a very big form to appear in future in a very disastrous manner. After the loans were lent, the loans which were given by the bank were sold to the another company to liquidate the loan into cash immediately.

Afterwards, the interest rate starts to rise which results into defaulting of borrowers. As a consequence, the company who purchased the loans from the bank started to sell of the investment which were made initially. As a result, all markets including stock market and others too, all crashed like never before. Many insurance companies were failed and bailed out by the Government.

During such crisis also, Barclays also decied to set new policies to avoid the impact of such disastrous failure upon the company. In such a case, CEO is the sole responsible for taking decision with regard to framing of new policies to protect the company. However, all such policies would be reviewed by subordinates but reponsibility of framing of policy in regard to such matters rests with CEO only.


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