Ethical And Financial Risks Of Banking Industry Meltdown: Essay

Length: 3 pages Sources: 3 Subject: Economics Type: Essay Paper: #4428235 Related Topics: Money And Banking, Investment Banking, Financial Institution, White Collar Crimes
Excerpt from Essay :

Banking Industry Meltdown: The Ethical and Financial Risks

The 2008 financial meltdown has been rated as the worst global economic crisis after the Great Depression of 1930. It shook the financial fabric of all the nations regardless of their economic status. It also led to the closure of most of the world's renowned banks and other financial institutions. Analysts have related the problems and the causes of this meltdown to the failure of the banks in their use of derivatives (Will, Handelman, Brotherton, 2013). Derivatives are defined as the financial arrangements that financial institutions formulate in order to hedge out against a future loss. The nature if these financial assets are that they are highly profitable and at the same time perilous (Beder & Marshall, 2011). The allure of profits is what baits the managers to adopt and use them in their institutions. This study focuses on the ethical dimensions of the 2008 Global Financial Crisis and the role of corporate culture in its occurrence.

Ethical practices as the moral philosophy

The dominant moral philosophy that appears to be the underlying cause and reason for the 2008 financial crisis is the ethical practices of the managers of the financial institutions of that time. Although the derivatives are themselves perilous, the managers also contributed to the occurrence...

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The desire for profits that come with the use of derivatives clouds their judgment making them to always scheme on how to impose it on the unsuspecting clients. The nature of this trade is that the motive of the managers is to derive the potentially high profits. However, in the event of loss, the investors lose their money (Koslowski, 2011). Cases of uncertainty among the traders often worsen the situation. The trading agencies that are in charge of the business normally get the derivatives to be sold without being fully furnished with sufficient information on their risk portfolio. This exposes them to dangers of loss since they will be making decisions about assets cannot control financially. This is the central failure of the managers and is the contributing cause of the 2008 financial crisis (Will, Handelman, Brotherton, 2013).

Occurrence of the 'white collar, and 'blue collar' crimes

Blue-collar crimes are those crimes that are committed with the use of the effort more than the brain. While collar crimes are the opposite. These two crimes can be applied concurrently or separately. For the 2008 crisis, there is evidence that there was more application of the white-collar crime than the blue collar. The actions of the managers of the then existing financial institutions to hide vital information from the traders as well as…

Sources Used in Documents:

References

Beder, T.S., & Marshall, C.M. (2011). Financial Engineering: The Evolution of a Profession. New York: John Wiley & Sons

Koslowski, P. (2011). The Ethics of Banking: Conclusions from the Financial Crisis. New York: Springer Science & Business Media

Will, S., Handelman, S, Brotherton, D. (2013). How they got away with it: White Collar Criminals and the Financial Meltdown. New York: Columbia University Press


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