Bank Crisis Involving Less-Developed Countries
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Banking crisis is an experience that does not only befall international institutions but can also be faced by local financial institutions. Undoubtedly, any banking institution would require proper management coupled with a balance of structure to ensure sufficient progress towards its purpose. Any balance or mismanagement for such a system would cripple its operations and lead to a collapse or crisis that can spread all over. Developing countries are the leading financial borrowers and sometimes goes ahead to borrow higher amounts that they cannot service (Eun & Resnick, 2015). Borrowing huge amounts have two effects the first being bringing misbalance in the gross net product of the country if the borrowed amount is higher than the GNP and operation burden of the lending banks.
Weak banking and bad operating environments can also be lead causes of the financial crisis. Developing countries do not provide proper lending alternatives for banks since their loans take longer to service, and they may even be overwhelmed to repay and request for amnesty from the lenders. The external environmental factors and the crises experienced by the developing countries do not take into account the systematic banking structures into consideration. If the banking crisis persists, it has a potential of spreading to other financial institutions (Eun & Resnick, 2015). The crisis has significant effects on the banking sector, and other industries and measures of containment have to be in place.
Some of the solutions include regulatory reviews and compliance by banks and countries to ensure that the operations are efficient (Eun & Resnick, 2015). The sustainability of economic policies of a country should address its debts and take into account the possible banking pressure and distress. The averting of the financial crisis requires banks to convert the debts into face bonds or convert them into a bind with reduced interest rates. The debtors can again get more lending to get going and create wealth that would enable them resettle what they owe the banks.