Safer rules, Safer banks

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The financial crisis was in 2008 and -since thousands of UK citizens who owed money to banks could not afford to pay the money back- the banks could not give out money for people in their savings account, which lead to a financial crisis that then became global. The bankers were given rewards (at early February annually) for earning huge sums of money so to earn huge sums of money; they offered and approved loans to everyone who were claiming loans. They thought it was a good idea since when people have loans, as well as the money that they ow the bank, they also have to pay interest (interest is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets) which would result the bankers in profit. It meant that the bankers would be paid well, at early February each year, which made them wanting to take risks and give as much loans to people as possible. Unfortunately, the people could not afford to pay the money and not willing to pay the money back. This resulted in the bank losing huge sums of money and the bank could not afford to give loans to people who were trustworthy of paying or being able to afford to pay for people who had savings accounts. In order to prevent the bank from bankruptcy, other banks and government had to intervene to help the bank. Those banks lost money from helping them and they lost huge sums of money. To stop those banks from being bankrupt, more banks and government had to intervene to help them and as many banks did not have any money left, it lead on to becoming a financial crisis amongst all of the banks in the UK.

Why have bankers made risky decisions just to earn extra money?

Why hasn’t someone intervened to stop the financial crisis?

I strongly believe that in order to stop the financial crisis happening in the UK and globally, we have to change how bankers are being paid. I believe this since the main reason that the financial crisis is happening because the bankers will earn huge sums of money and the bank pay huge sums of money to their bosses as a bonus; it tempts them to take more risks to earn money, which was what actually started the financial crisis. If we change the rules that the bankers are paid the most if they lend loans that people can afford after, they would want to earn more money. Instead, the bankers would make safer loans, the banks would not lose too much money, other banks would not have to intervene and help and there would be no financial crisis in the UK or in the world in a long time.

Another reason I believe that we should enforce this idea because if the banker’s bosses the banker’s money for making safer lends the bank will have much money to give money to desperate people who are trustworthy of paying the loan with extra interest, giving an extra profit to the bank. With this solution, the bankers can earn a lot of money without taking too much risks and giving it to people who cannot afford to return the money that the bank has given them.

Jewel opened her own hair salon in Norcross in 2008. Unfortunately, the financial crisis flooded in and roughly a year’s time, she had to make special discounts to have more customers to pay the debts and she worked hard all by herself. Other than her hair salon, she had to look after her son and she had an extremely high mortgage that she was unable to pay. She was struggling with the massive bills however, if we change how bankers are being paid, she would be able to manage her bills easily.

This idea would be challenging to happen because if all banks had rules like this, it would take a long time to be enforced to all of the banks in the UK. In addition, all of the banks would have to agree on this idea and make rules for their banks however, some banks want to earn as much money as possible and they are willing to take more risks resulting them in them losing huge sums of money.

The people who the idea would be beneficial to are business men/women who are developing their business and planning to create a business because with the bank’s extra money (after lending loans safely) can be used to give loans to business people and using this money, they can carry on or set a business. After they carry on with their business or set up a new business, they will earn a huge profit from their business; they will definitely be able to pay the money that the bank has given to them, and they will be able to pay interest. This could result with the business people being content since they have a loan to start or develop a business and the bank will be pleased at the same time because the bank would have extra profit from the interest paid from the business people.

I strongly believe that the people who would miss out are teachers, parents who home care for their children and retired adults. I believe this since many of the people have either a small salary or no salary at all which makes it unlikely that they will pay it back. However, if they have a high credit score or quite a lot of money, they might be able to have a loan.

This idea is fair because the bank will not take too many risks or maybe no risks at all and the bankers will make more lends to business people, resulting in profit for the bank. As long as every bank accepts this rule, it will be very unlikely for another financial crisis to happen in a very long time.

Being sceptical, the idea is not fair as well since, with this solution, people who are homeless and need to buy houses for themselves or for their family and people who have no food and are starving do not get to have the money that they need. This is because, it is very unlikely they will pay the money back to the bank, let alone their interest and my idea is safer lending so lending to a homeless person is not safer lending since they do not have any money to repay the money back to the bank or interest.

https://www.bankrate.com/personal-finance/smart-money/4-personal-stories-of-the-great-recession/

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