Impact of the credit crisis on investment banks
Topics: Subprime mortgage crisis, Debt, Morgan Stanley, Goldman Sachs / Pages: 8 (1815 words) / Published: Sep 21st, 2013

Cause of Problems for Financial Institutions during the Credit
Crisis: Select a financial institution that had serious financial problems as a result of the credit crisis. Determine the main underlying causes of the problems experienced by that financial institution. Explain how these problems might have been avoided.

Table of Contents
I- Credit crisis .................................................................................................... 2
II- Impact of the credit crisis on investment banks ................................. 2
1) Definition of Investment bank ................................................................... 2
2) Impact of the credit crisis on investment bank ..................................... 2
III- Lehman Brothers .......................................................................................... 4
1) Introduction ..................................................................................... 4
2) Reasons lead to bankruptcy ............................................................ 5
3) How these problems might have been avoided. .............................. 7
IV- References .................................................................................................... 10

Page 1

FINANCIAL MARKETS & INSTITUTIONS

I-

Credit crisis

The credit crisis began in the United States in 2007credit that refers to a sudden shortage of funds for lending, leading to a resulting decline in loans available.
A Credit Crunch can occur for various reasons:
 Interest rate increases suddenly
 Money is controlled directly by the government.
 A Drying up of funds in the capital markets
The recent credit crunch was driven by a sharp rise in defaults on subprime mortgages. These mortgages were mainly in America but the resulting shortage of funds spread throughout the rest of the world.

II-

Impact of the credit crisis on investment banks
1) Definition of Investment bank

An

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