Daniella C.

Puerto Banking and Financial Institutions

BSBA-2B. January 28, 2020

"The 1997 Asian Crisis and The 2007 US Financial Crisis"

The Asian financial crisis was a period of financial crisis that gripped much of
East Asia and Southeast Asia beginning in July 1997 and raised fears of a worldwide economic
meltdown due to financial contagion.The crisis started in Thailand with the financial collapse of
the Thai baht after the Thai government was forced to float the baht due to lack of foreign
currency to support its currency peg to the U.S. The crisis started in Thailand ,Indonesia, South
Korea, and Thailand were the countries most affected by the crisis. Foreign debt-to-GDP ratios
rose from 100% to 167% in the four large Association of Southeast Asian Nations (ASEAN)
economies in 1993–96, then shot up beyond 180% during the worst of the crisis.

This issue can be connected to the chapter one which is the IFs role as Delegated
Monitor for example the International Monetary Fund (IMF) stepped in to initiate a $40 billion
program to stabilize the currencies of South Korea, Thailand, and Indonesia, economies
particularly hard hit by the crisis. This only shows that this financial institution help other
countries in order for them rise up from the said crisis to avoid more damage that may include
or affect other countries economic activities. The Philippines on the other hand didn't
experience much about this crisis it is because of the remittances of our Overseas Filipino
Workers, they are the one who save us.

The financial crisis of 2007–08, also known as the global financial crisis and the
2008 financial crisis, was a severe worldwide economic crisis considered by many economists to
have been the most serious financial crisis since the Great Depression of the 1930s, to which it is
often compared. It began in 2007 with a crisis in the subprime mortgage market in the United
States, and developed into a full-blown international banking crisis with the collapse of the
investment bank Lehman Brothers on September 15, 2008. Excessive risk-taking by banks such
as Lehman Brothers helped to magnify the financial impact globally.
 In this issue we can relate it to the one of the topic in chapter two which is the
ERM. One of the banks that failed to recognize the Enterprise risk management is the Lehman
brothers which is one of the reason why such crisis occur they failed to recognize the importance
of prioritizing and managing the full spectrum of risks as an interrelated risk portfolio.

The financial crisis of 2007-08 has taught us that the financial market, once
shattered, can't be quickly restored. In an interconnected world, a seeming liquidity crisis can
very quickly turn into a solvency crisis for financial institutions, a balance of payment crisis for
sovereign countries and a full-blown crisis of confidence for the entire world. Since every
country is interconnected to each other, we are affected to what is happening to the economy of
the others. Therefore it is important for every country to have one common financial institution
to help them to monitor their different economic activities so that if there are problems that has
been discovered they can make an action immediately to avoid financial problems that might
affect the economic activities of the other countries or worst the world economy.

We must become one in the vision to have a continuous growth in our economy together with the
other countries.