Discussion and Peer to peer responses

For this Discussion Question, complete the following.

******1. Review the two articles about bank failures and bank diversification that are found below this. Economic history assures us that the health of the banking industry is directly related to the health of the economy. Moreover, recessions, when combined with banking crisis, will result in longer and deeper recessions versus recessions that do occur with a healthy banking industry. 

*****2. Locate two JOURNAL articles which discuss this topic further. You need to focus on the Abstract, Introduction, Results, and Conclusion. For our purposes, you are not expected to fully understand the Data and Methodology.  

*******3. Summarize these journal articles. Please use your own words. No copy-and-paste. Cite your sources.

4. word count 350 and more would we consider highest grade.

5. Your replies must focus on increasing knowledge of the class and must advance the discussion further. Simply affirming your peers does not count as a substantive reply. 

Need replay for this below 2 discussion

Discussion-1

According to the journal article published by Musdholifah, Hartono and Wulandari (2020), several attempts have been made over time to determine the actual causes of banking crisis. But researchers are unable to bring about a full proof list of causes that lead to the downfall of the banks as a whole. Using the crisis and default index, the authors of the article have tried to formalize a series of causes of banking failures and how these can be avoided in the future. The case of the Indonesian banks and their problems is taken to know about the main causes that are leading to their troubles in today’s business environment. The analysis of the case studies of these banks reveals that the internal bank processes and actions are the primary source of the troubles. It is highly essential for banks to use probability factors and predictions to determine the outcomes of their actions in the short term and long-term both.

According to the second journal article written by Ramirez and Shively (2012), a time series model can be used to evaluate the causes of the bank failures and their contribution towards economic crisis. The scales of 1920s crisis were taken to review the banking and economic conditions. Other variables were also accounted to know the main reasons for the failure and how it could have been avoided. Bank Failure Channel is the main agenda used by the authors to distribute causes, analyze them and emphasize on the things that could have been done right to achieve stability. Since banks hold the money of the customers and use them to derive economic profit, they tend to be highly responsible for the same. Every effort should be made to keep liquidity and offer stability to the customers and the economy both. Overall, the banking system is the economic foothold of an economy within this globalized world.

References:

Musdholifah, M., Hartono, U. and Wulandari, Y. (2020). Banking Crisis Prediction: Emerging Crisis Determinants in Indonesian Banks. International Journal of Economics and Financial Issues, 10, 124-131.

Ramirez, C. D. and Shively, P. A. (2012). The Effect of Bank Failures on Economic Activity: Evidence from U.S. States in the Early 20th Century. Journal of Money, Credit and Banking, 44(3), 433-455.

Discussion-2

When the banks are short of liquidity then the bank will be unable to lend the money to the customers or consumers. Then, as a result, there will below investment and fewer employees so that the employees may face many problems due to unemployment. If there is a decrease in the level of investment then it will lead to lower economic growth. When the economic growth is low then it leads to many real-life challenges and problems. By the fall of a bank or bank failure then it will create a large amount of unemployment (Brownbridge, 2002).

So the employees have a greater impact on the failure of a bank. Because if a bank fails then the employees could not work and they don’t get any salaries or benefits without salary they can’t survive of they can survive the level of economic growth will be decreased. As a result of the economic growth is lowered then we may face a number of problems. If a bank fails then the FDIC bank will collect and sell the assets of the bank which is failed. And also the FDIC bank will settle all the debt of the failed bank. The banks play a crucial role in society and also plays a role in the development of the economy. Because they serve many people or customers to provide loans and allows the greater investment and increase the supply of money. Lending money is the most important activity which helps in the development of the economy (Doumpos, Gaganis & Pasiouras, 2016).

References

Brownbridge, M. (2002). Resolving Bank Failures in Uganda: Policy Lessons from Recent Bank Failures. Development Policy Review, 20(3), 279-291. doi: 10.1111/1467-7679.00171

Doumpos, M., Gaganis, C., & Pasiouras, F. (2016). Bank Diversification and Overall Financial Strength: International Evidence. Financial Markets, Institutions & Instruments, 25(3), 169-213. doi: 10.1111/fmii.12069