Wednesday, August 28, 2019

The main EU regulatory to the financial crisis Essay

The main EU regulatory to the financial crisis - Essay Example The German government and regulators in the finance industry requested the European Commission to bail them out within six months after the crisis began. The bailout of 9 billion Euros was granted and was directed at the IKB German Bank (Grote, & Marauhn, 2006). Furthermore, the governments of other member countries of the European Union pumped in capital within their financial institutions. Examples included the Northern Rock bank located in the United Kingdom. The fast pace of the spread of the financial crisis was not unexpected since most of the securitized United States debt was originated for distribution to European investors and institutions. To this end, the financial crisis that affected the European Union is blamed on the business model of â€Å"originate-to-distribute† that is synonymous with U.S banks (Mattoo & SauveÃŒ , 2003). Evidently, the large international financial institution adopted this model which allowed the institutions to increase their lending powe r without disrupting the set capital standards by regulators. Moreover, this model created instruments such as credit default swaps, mortgages guaranteed by securities, and debt obligation that was collateralized. In this regard, such instruments played a part in exploiting weaknesses evident in financial regulatory structures. In addition, under-written mortgages and securities, insufficient coordination within national regulatory bodies, and regulatory arbitrage by the regulators all played a role in undermining the regulatory structures.

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