How Stable Is The Banking Industry?

The latest economic crisis shook the financial world and alerted us to several ways in which the entire system needs to be shored up

. With the banks and other financial institutions being responsible for over exposing themselves to bad debts, it showed that the banking system is a lot more fragile than was previously considered.

With toxic loans spiraling out of control, the banks became reluctant to release money into the economic system, creating a credit crisis. Those who had the money were no longer ready to grant loans and many who were reliant on credit to function found themselves without the working capital that they needed. The toxic loans that economic establishments were exposed to were simply too much for some and a few banks even found themselves being bailed out with massive government packages, or going out of business completely.

Along with the high street banks suffering, investment bankers were also hit by a sinking stock market as investors looked to cash out their holdings. In addition to scandals and the revelation of unethical dealings, the whole system was close to collapse as the public lost confidence.

Since the initial crisis, much has changed. Financial establishments are now under much tighter regulations regarding how they operate and increased requirements are needed to be eligible for a loan at present. This might mean that fewer individuals can qualify for a loan, however this will help to protect the system as a whole.

This does not mean that the crisis is over yet. Many individual home owners are still affected by a weak economy and more foreclosures are yet to enter the system. A lot of foreclosures could mean another recession but government incentives are helping to prevent a slump that is too massive to handle.

In addition, some of the larger economies in Europe like Spain and Portugal are suffering terribly and the exposure of US banks in the European continent could be a leading cause for concern if things dont improve there.

Just recently Fitch ratings, an organization that is held in high regard by individuals throughout the finance industry, has rated the US banking industry as stable, if slow. With the government now overlooking the banking system much more vigilantly to ensure that past mistakes of old aren't repeated, whilst injecting stimulus incentives into the market, it would appear as though there is now a greater emphasis on making certain that everything is done properly so as to better safeguard individuals and the economy from any weaknesses that the banking system might have.

As is to be expected, the banks earnings and revenues are down from before the crisis occurred but they are rising once more.

by: Cory Boatright

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