LESSONS FROM THE FINANCIAL CRISIS The financial crisis was ignited exactly ten years ago: on September 15, 2008, Lehman

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LESSONS FROM THE FINANCIAL CRISIS The financial crisis was
ignited exactly ten years ago: on September 15, 2008, Lehman
Brothers filed for bankruptcy. That same day, Bank of America
announced its acquisition of Merrill Lynch. On September 16, the
Federal Reserve bailed out AIG. On September 17, the markets were
in free-fall. On September 18, Secretary Paulson and Chairman
Bernanke briefed Congressional leaders on the contours of a massive
bailout plan. And on September 19, the Treasury Department took the
unprecedented step of guaranteeing U.S. money market funds. The
financial crisis ravaged the U.S. and world economies and required
extraordinary government interventions to prevent a major worldwide
depression. It spurred a host of legislative, regulatory,
enforcement, litigation, and political responses, many of which are
still unfolding. It destroyed venerable businesses and commercial
activities and spawned others. And it reshaped market dynamics
across the global economy, including in such diverse sectors as
private funds, derivatives, securitization, M&A, bankruptcy,
and real estate.
Answer ALL the questions in this section. You have been tasked
by the South African Reserve Bank (SARB) to be part of a task team
that is developing a risk management framework for the banking and
finance industry. The scope of the task involves ensuring that the
South African standards are aligned to global trends and thus you
have prioritised drawing important lessons from other countries.
You are expected to submit a comprehensive report to the Reserve
Bank Risk Management and Compliance Committee on the 6th of
December 2022. The contents of your report should include a
highlight of the following. Answer ALL the questions in this
section.
Question 1
1.1 Provide a detailed analysis of the causes of the global
financial crisis of 2008 including the role of the different
stakeholders. (25 marks)
1.2 Review the different strategies that should be implemented
by the SARB in order to avoid the occurrence of crisis similar to
that of 2008. The issues provided should be relevant to the South
African context (25 marks)
1.3 It has been evident in your research that most of the risks
that have affected the financial sector are not detected for a long
time. Against this background provide recommendations on the
strategies that need to be adopted by the committee in ensuring
that the efforts of identifying and assessing risks are improved in
the financial sector. (25 marks)
1.4 As part of your conclusion your report should discuss
extensively the factors that need to be considered when designing a
risk management strategy for the financial sector. 25 marks