🖊 Subprime loan is refer as near-prime, non-prime & second-chance lending

🖊 Meaning, making loans to people who may have difficulty maintaining the repayment schedule

🌻 There are number of theories as to what led to mortgage crisis

🌻 Many experts & economists believe it came about thru the combination of a number of factors in which subprime lending played a major part

🍓 A housing bubble is an economic problems that occurs in local or global real estate markets

🍓 It is defined by rapid increases in the valuations of real property until sustainable levels are reached

🍓 Housing bubble generally identified after a market correction, which occurred in US around 2006

Number of subprime loans rose as rising real estate values led to lenders taking more risks

Some experts believe that Wall Street encouraged this type of behavior by bundling the loans into securities that were sold to pension funds

🍀 In 2007, average differences in mortgage interest rates between prime mortgages declined from 2.8% to 1.3%

🍀 This means, the risk premium required by lenders to offer a subprime loan declined

🍀 Instead, the decline of the risk premium led to lenders considering higher-risk borrowers for loans

⚽ There would be a housing market because of the over-valuation of homes during bubble period

⚽ Estimated ranged from a correction of a few points to 50 percent or more from peak values

☁ The foreigner bank decides its presence in the participial capital of the bank in the other country

☁ This presence is subsidiary means the local bank maintains its name and the control in its administration

☁ Consortium banks is a common MNC in the form of joint venture from of different nationalities

☁ usually provides the superior technology management know how, capital, access to finance

☁ The bank is installed in a foreigner in order to provide services not to residents of the local country

☁ The state of installation places as a
condition that the activities are offshore

☁Contrary to the off shore banking, the banking include themselves organically in the financial system

Economists believe that the US housing bubble was caused in part by historically low interest rates

The housing bubble was caused by the decline in real long-term interest rates

a.First, sudden shifts in market expectations and confidence were the key sources of the initial financial turmoil, its propagation over time and regional contagion. According to the other view,the crisis reflected structural and policy distortions in the countries of the Asian region.

b.Secondly, fundamental imbalances caused the currency and financial crisis in 1997. Once the crisis started, market overreaction and herding caused the plunge of exchange rates, asset prices and economic activity to be more severe than warranted by initial weak economic condition.

✅ The multifaceted evidence on the structure of incentives under which the corporate and financial sectors operated in the region.

✅ Focus in context regulatory inadequacies and close relations between public and private banking and financial institutions.

✅ At the corporate level, political forces to maintain high rates of economic growth had lead to along tradition of public guarantees to privates projects.

✅ While common wisdom holds that borrowing from abroad to finance domestic investment (DDI) should not raise concerns about external solvency.

✅ In 1997, before the crisis, as many of 7 of the 30 largest conglomerates could be considered effectively bankrupt.

✅ Investment rate and capital inflows in Asia remained high even after the negative signals sent by indicators of probability.

✅ By the end 1996, a share of short terms liabilities above 50 percent was norm in region

✅ Moreover, the ratio of short term external liabilities for foreign reserves, a widely used indicators of financial was above 100 percent in Korea, Indonesia and Thailand.

✅ From the summer on 1997 onward,rapid reversals of financial capital inflows led to the collapse of regional currencies and international investors panic.

✏ No terminology for islamic financing product
✏Interpratation of Arabic terms creates confusion among bank clients and also public

✏ vocabulary or term used for Islamic products.
✏ Modus operandi of financial instrument and their documentations.
✏ Pricing formula for Islamic financial product.

✏ Implementation may be vary from institution to institution.
✏ Practical need may not always be the same where chance for financial innovation either in form of the new or hybrid products will remain open.

: ✏ Operations by an Islamic banking will involve accommodation of interest of the bank's principal, the bank staff and the fund-seekers.
: ✏ Standard pricing formula together with Shariah principles are needed for those on the front desk for efficient working.

✏ Faces the problem of general acceptability from non-Muslim and Muslim communities..

✏ Lack of qualified manpower in the advancement of Islamic Banking.
✏ Pioneers in Islamic banking developed their financial instrument and through trained their stuff.

✏ Logistic considerations do not permit timely and monitoring of all banking operations

✏ Can be detected when one takes careful look at the existing relationship between SMEs and Islamic banks.

✅ In 1997, the drop of real estate and stock markets where sustained speculative trends were in part fulled by foreign capital flow, led to the emergence of wide losses and outright default in the corporate and financial sectors.