October 6, 2015


Financial crisis with the emergence of modern age is invariably interwoven with the fabric and fate of modern society especially by way of financial contagion as it varies markedly from clime to clime .Recessions ,depressions and meltdowns are mere tags and bizarre nomenclatures as variegated portraiture of the business cycle being widely used to classify the gravity of financial crisis at a particular period .They are used to define the precarious climates in which economies might find themselves in the turbulence cycle of free market or other ways round .
In this elaborate piece let us first define the term ‘’Financial Crisis’’ prior to its intricate analysis which is necessary if we are to address ,prevent and if possible prohibit the reoccurrence of the financial crisis and its precarious impact  often  unbearable especially in the  developing countries .
The term ‘’financial crisis ‘’ extremely differs by usage and definition across the world based on the level of each country’s exposure though varied and multidimensional by impact.Altman-1997] describes it as the simultaneous crash of related financial institutions brought down by the action and inaction of investors including its speculators and depositors probably stricken under duress in an attempt to liquidate their assets or offload their savings into safer assets .Another study captured the intensity and broadness as it applied to diverse climate confronted by crisis in which some financial institutions lose a larger chunk of their assets .For instance ,according to Aliber -2005] banking panics were responsible  for the crash and many financial crisis of the 19th and 20th century and these panics also coincided with the recessions of the period .Financial crisis also includes stock market crash and financial bubble bursts ,currency crisis ,sovereign defaults –Valencia-2008].
Cases of financial crisis abound worldwide ,over the last few centuries at least eight centuries have occupied the attention of nations in the international community as they grew so despondent and desperate for faster solution to prevent future reoccurrence .The fate of modern society hangs in the balance and crises have persisted as it were from the ancient.This speaks volume of the fundamental weakness of modern civilization.
Wikipedia refers financial crisis to ‘’a broadly applied variety of situations in some financial institutions that suddenly loose a large part of their assets or some financial assets lose a larger chunk of their nominal value .It also admits that in the 19th and 20th centuries ,banking panics were associated with diverse financial panics and almost all panics coincided with recessions .Stockmarket crashes ,financial bubble bursts, sovereign defaults and currency crisis are similar types associated with such crisis .It directly occurs as a result of loss of paper wealth value but not necessarily impact negatively yet on  the real economy.As crisis persists and defy all solution , the fundamental fabric of mordern civilization is similarly threatened .
It also refers to a situation in which the supply of money is outpaced by the demand for money .This now indicates liquidity evaporation orchestrated by mass withdrawals of Banks ‘ available money as they sell other short term investments to raise cash to bridge the shortfall and avoid impending crash.It is a situation in which assets value  drops so easily and rapidly and also includes the erosion of the value of financial institutions. It is caused by bank runs and bank panics in which investors sell off assets or withdraw money from savings account as they envisage future drop in the value of these assets .should they remain at that particular period , in such ailing institutions panics or runs can be caused as a result of assets being overvalued or directly caused by investor vulnerable behavior .Lower asset prices can be caused by a rapid string of sell off   including more savings withdrawals.If prolonged and unchecked ,economy can dovetails into a recession  and even a depression .Lack of necessary liquidity in financial institutions can be attributed to economic recession or depression .Financial crisis may be
caused by natural disasters ,negative news among unknown causes .It causes a decrease in economic activities and can easily also reinforced itself .It refers to acclimate in which a large financial institutions lose a large  part of its value  or some institutions through financial contagion .Financial crisis is different from economic crisis which affects the entire economy .Its rampant occurrence in modern society tends to affect specific sectors of the economy .It can hit a single sector and not necessarily multiple sectors .

There is no doubt that if  financial crisis persists ,it leads to economic crisis .The global financial crisis of 2008 was caused by irresponsible debtors and if trends continue ,it can perpetrate something worse than a depression .Before getting down to the brass tacks to unleash financial crisis voluminous historical exposition ,let us first observe business cycle and then types of financial crisis.For instance ,since 1870,real gross national products –GNP in the United States grew by an average of two percent per annum though it has not been smooth neither steady nor stable.These alternating period of slump ,rise and fall,recovery and succession of ups and downs movement is often regarded as Business cycle .Ordinarily ,it is expected as this influences recessions and depressions and minor economic slumps and crisis.
Business cycles have much in common ,they also vary and complex in size and depth ,have never being identical let alone precise and regular and also vary in duration and pattern of occurrence .Economists try as much as possible to forecast the movement and twists and turns of the economy .In most cases even when velocity is noted disputations often occur about its pace,longevity,level of stability and steadiness.
Ordinarily ,as the periodical ups and downs of economic activity market forces rational or irrational immensely contributed to the configuration  and reconfiguration of the  nature of business cycle at a time utilising the structural imbalance between aggregate supply and aggregate demand curves .The interaction between these curves tend  to move economy forward or backward.  
In this context ,business cycle passes through four stages and subsidiary cycles .This ranges from trough to expansion, peak and then contraction.Trough indicates a low part of the business cycle and may be called a recession,for a short term drop or for at least two or three consecutive quarters or can be termed as depression for a longer period ,very deep in decline like the great depression of 1930s .In this scenario business activity often drops ,characterized by closure of factories ,production and workforce reduction including productivity decline and high unemployment .The situation is also characterized by drops in aggregate demand due to contraction on aggregate consumer spending.Consequently the stagnation of consumer demand lowers prices to attract unwilling customers and stimulates inventories’reduction .Other features such as poor profits ,low investment ,undercapitalization and gross underinvestments cannot be easily detached from this stage .
As soon as economy cools off ,it enters into the second phase –expansion .It start slowly with its silver linings as merchants who once sold off excess inventories during recession will now restart reordering ,reinvestments and gradually  restocking their shelves   . New investment access,  profiting from the launching of  government programs to stimulate spending automatically boosts the economy .The return of animal spirits in a conducive environment can boost the dire need to borrow repayable in anticipation of future profits fuels aggregate demand in the long run.This upside is attributed to output expansion ,income growth ,and increase in business investment and  high employment.The growth in aggregate  demand  in the long run  is responsible for bigger drops in high unemployment .Cheap funds mobilises investment at a relatively low cost  .The scenario drives up  consumer prices faster and creep up wages even faster.
Peak is the final expansion and the limit of expansion which is characterized by scarcity of some factors of production further growth cannot continue when full employment of available resources had been reached.The peak cannot go on forever like the trough.Challenges abound such as the corporate high costs of labour and raw materials .Consequently ,the rate of aggregate demand begins to slow down by tight labour cost and equally slowing down the rate of finance.Car sales and housing prices also drop giving smart investors the capability to read the danger signals.
Contraction is the result and opposite of the peak period .At this stage ,characterized by excess inventories ,slumping sales ,investment automatically slumps ,the  same for production as aggregate supply exceeds aggregate demand .As the flipside of expansion phase , optimism vamoosed at the end of contraction period .These stages are perennially recycled.
We agree that business cycle swings  is the origin of financial crisis including the unpredictability and the unworkability of market forces that aggravated this position so that it will be very hard to predict the unforeseeable years ahead .Our earlier assertion noted that it is because  market forces are not rational .There had been assumption that the hurricane-like and tornado-like natural phenomenon was exerted  as a reflection nature’s cause even though it may not comprehended by mankind struggling to survive and simply can do nothing about it.For instance , in the United States  ,business cycle recorded runaway boom and bursts from 1815,1837,1893,1907 and then 1929.She experienced financial panics in an  alternating periods of prosperity  .It is also believed that as an integral part of capitalist enclaves ,no one could out law business cycle .Even the extreme fluctuation that western economists though are controllable have  never ceased to spin out of control especially with the emergence of meltdown only indicates the fundamentally nature of free market still requires surgical operation eco-psychiatric rehabilitation not as it were over the previous centuries.Otherwise it ought to be suspended by or for  marsolism-a better panacea and can indeed be even  by the acrimonious troughs of nature ushering in new trend line.
Since world War 11 the American economy has not experienced a depression of the likes of 1930,apart from its common recessions as recorded in 1949 , 1954, 1958,1961 ,1970,1975,1982,1990-92,and the 1999-2000 dot com burst menace. Though it was claimed that economists who monitored business cycle movement have not been able to do proper curtail and meltdown was a living evidence .As long as recession keeps turning up ,marsolism believes  the frequencies and the  unpremeditated frequencies of the meltdowns and possible depressions cannot be detached from the unpredictability of business cycles for development or cultural cycle that can acts as neuter to this sole economic is still yet to be theorized and moreso,knowledge cycle as ultimate panacea has not not been theorized either  .Any avoidance of this common perils cannot be possible without the adoption of marsolism in a fast changing new world order .

According to different schools of thoughts the causes of the business cycle have been linked to both internal or external factor-forces beyond the control of the economy. Such as crisis, wars, weather ,foreign trade conflicts , immigration rate and threat, population time bomb, new growth resources ,technological innovations have been linked to these causes .Therefore these external theorists or theories imply that it cannot be controlled or predictable.
The opposing school of thoughts places much emphasis on the external causes such as flow of money theory ,total spending theory and wage rate theory and a host of psychological factors .Either causes of the opposing internal or external have contravened and linked to inequalities of wealth .But does wage ,total spending, and flow of money theory ever really matter? We critiqued data sources and unveil reason .How tenable are they with the benefit of history and the maturity of the millennia?  

                                                      TYPES OF FINANCIAL CRISIS
Financial  crisis offers its manifold and  popular types of banking crisis tend to occur when the system is overheated .We shed light on evolution  of bank crisis ,
Bank run occurs in a fractional reserve banking system .This entails simultaneous withdrawal of their deposits by a large number of bank clients either by cash demand or funds transfer into government bonds .Consequently , this precipitates a run on the Bank .They can also put money in a safer investment ,a safer institution or precious metals etc
It progresses if not curbed and even far more dangerous ,building its momentum as number of clients withdraw their deposits and potentially default. A bank runs out of cash ,insolvency rears its ugly head as institution reaches for the exit door .Examples of Bank runs such as the United States Bank runs in 1931 and the embarrassing episodes of Northern Rock that happened in 2007 .
In case of Bank panic ,it happens when several Banks experienced Bank runs at the same time As banks experience run and panics , clients withdraw deposits and convert them into cash to escape and this worsens the situation.If prolonged it can lead to systemic banking crisis .Systemic banking crisis indicates that the entire system is technically affected and virtually all banking capital is wiped out .The consequences of bankruptcies can lead to economic recessions as domestic businesses starved of capital and banking system shuts down .If prolonged , depression or greater depression results and the total crash of an economy .
So Banking crisis as a type of financial crisis builds from bank runs into bank panics otherwise known as mass bank runs  and then  through financial contagion leads to systemic distress .Inspite of the struggle to revamp the quality and quantity of Banking regulation in modern times by policy makers and central bankers ,this form of financial crisis has not yet abated especially in this volatile  21s century .
                                                     BUBBLE BURSTS
Another form of  financial crisis is the bubble bursts popularly known as speculative bubble.A major contributory factor to this phenomenon is the presence of market buyers who purchase assets  in hope of an expectation to sell at a higher rate .This is often preferred instead of future income computation  and the amount it can generate during the envisaged  period  .Of course for every bubble there is a possibility of a crash in assets prices .They can buy as many  as they desire but when the sell the market will fall .It s almost pretty difficult to predict the bubble burst outcome the quality of asset prices and its fundamental value .
Speculative bubble burst samples abound worldwide involving bubbles and crashes in the stock market and asset prices crash .For instance Reihart and Rogoff trace inflation to the  Dionysius of Syracuse  of the 4th century BCE which begin the eight centuries  in 1258 in addition to the debasement of currency which also occurred under watch of Roman Empire and the remains –the Byzanthine empire .They trace it down to earliest crises onto the 1340 default study  of the Bank of England-an indication of her setbacks with France in the hundre years war.Infact the defaults lasted seven defaults and this was by imperial  Spain including four under Philip 11 and three under his successors. –
The voluminous trends unmasked the imperfection of free market .Others include -14th century Banking Crisis-the crash of Peruzzi and the Bardi family of  Compagnia dei Bardi in 1345, Dutch Tulib bulb  crisis in 1630s ,the 18th century crisis such as South Sea Bubble -1720-U.K.,Mississippi Company-1720-France,Crisis Of Amsterdam ,begun  by the crash of Leenderert Pieter de Neufville which spread to Germany and Scandinavia ,Crisis Of 1772 was begun by the crash of Bankers  Neal ,James ,Fordce and Down ,Panic of 1785 and  1792 in United States,,Panic Of  1796 -1797 in both U.K. and U.S.,Danish State Bankruptcy  of  1813,Post-Napoleonic depression –Post 1815 Panic of 1819-Bank failures precipitated by U.S.recessions and led to first boom to burst economic cycle ,panic of 1825 in which almost banks failed including Bank of England a pervasive economic threat,Panic of 1837-another recession linked Bank failures succeeded by 5 year  depression ,Panic of 1847-unmasked the crash of financial markets in the U.K.which truncated the 1840s railway industry boom ,Panic of 1857-a recessionary Bank failures ,Panic of  1866 was a global financial downturn  which followed the failure of Overend,Gurney and Company  in London ,Long Depression-1873-1896,Panic of 1873-Bank failures linked also to recession in the U.S.seconded by 4 years depression ,Panic of 1890,Recessionary panic of 1893, Australian Banking crisis of 1893,Panic of 1896.
Now in the 20th century others include ,the panic of 1901,another American recession was begun by the battle for financial control of Northern Pacific Railway ,Panic of 1907-the last recession prior to great depression ,German inflationary crisis of 1920s, Wall Street crash of 1929 and Great Depression of 1929-1945-the worst in modern history  ,the crash of Vienna Stock market on Black Friday , 9th of May ,1972,1973 oil crisis,1973-74 stock market crash caused by oil crisis ,1973-75  Secondary Banking crisis ,Latin America debt  crisis  in 1980s beginning from Mexico in 1982-the Mexican weekend ,Bank Stock crisis-Israel-1983 ,the Japanese  Bubble burst of 1980s and the 90s,1987-Black Monday as the largest one day percentage decline in Stock market  history ,1989-91 U.S. Saving and Loans crisis,Scandinavian Banking crisis of early 90s involving Swedish and finish ,Early 90s recession,1992-93-Black Wednesday –a sort of speculative attacks on European Exchange rate Mechanism ‘s currencies,1994-95 Mexican crisis ,Asian 97-98 financial crisis led to Asian Banking crisis and the Russian financial crisis  .In the 21st century,the Turkish 2001 economic crisis , 1999-2002 Argentine economic crisis  ,the 2000/2001recessions and  dotcom bubble and the  asset price bubble and late recessions-2000 which caused the real estate boom in America,energy crisis of 2000,the Indian property bubble of 2005,the British property bubble of 2006,Irish property bubble of 2006.housing bubble  , U.S.housing bubble of 2007,the former Florida Swampland  real estate bubble ,Spanish property bubble of 2006,China Stock and property bubble of 2008 ,Rhodium bubble of 2008, the   Uranium bubble  of 2007,   the 2008 Subprime mortgage crisis in the U.S.,Australian first home buyer property bubble of 2009 , 2007-2008-Global economic and financial crisis ,Icelandic financial crisis -2008-2011,2010 European  sovereign debt default crisis till date, Greek Government debt crisis of 2014,  Russian financial crisis and Chinese stock market  crash of 2015.
International financial crisis includes currency crisis , sovereign defaults fall under this survey .While the currency crisis or balance of payment crisis as  regarded is a situation in which as a result of speculative attack on its currency a nation is forced to devalue its currency under the regulation of fixed exchange rate.But sovereign default implies that or can be regarded as a situation when a country fails to pay back its sovereign debts but i .These nomenclatures  are driven by the voluntary decisions of governments and not voluntary decisions of private investors .This means sovereign investors ‘sentimental change in decisions can result in capital inflows or suddenly fuels capital flight phenomenon .
In the period 1992 /1993 season ,several currencies  of the European foreign exchange rate mechanism .Consequently , were forced to  devalue or withdraw from it .The currency crisis in Asia in the 1997/98 financial crisis precipated by the devaluation of Thai Batch, the Russian financial crisis of 1998  and those in Latin America defaulted in early 80s was caused by Rubble devaluation etc .The financial crisis of the 19th and 20th centuries were in most cases associated with Banking panics and diverse recession also coincided with  the  panics .
But the crash of stock market ,financial bubble-burst ,sovereigh defaults and currency crises which directly result in loss of paper wealth which often does not results in real economy changes  are often regarded  as financial crisis.Many economists have questioned its sources and how it occurs and also development of theories and how it could be prevented .Still they share no consensus on methods of resolution –a major reason why they have persistently occur from time and time calling for  economists to unite .,,.
The currency literature explores these details for researchers, central bankers  and policy makers .
                                                 RECESSIONS AND DEPRESSIONS
In the exposition of the market ,we unmask here the nature of recessions and depressions as noted above  .As coined by Anna Schwartz and Milton Friedman –exponent of monetarism –they argued that the crash of 1929 was caused by first bank runs ,then Bank panics and later aggravated by systemic crisis .In the 20s America had 30 ,000 Banks at its peak  and by 1933 almost 13,000 banks had crashed  in that crime against humanity in the greatest depression in America .Therefore they believed it was caused by policy recklessness basically the monetary policy blunders of The Fed .Ben Benanke former Fed. Chairman under whom meltdown exploded also concurred in like manner that central Bankers were to be held responsible for this fiasco .
During financial crisis government can use its political power to prevent widespread contagion.For instance the Tesobono Swaps which were instrumental to the Tequila crisis in Mexico in 1994 was bailed out by the American presidency to avoid contagion .Unfortunately when Thailand defaulted on the Baht in 1997 and later devalued  its currency ,there was no such intervention since they hardly shared borders .
Rather than been regarded as causes,  sources such as Wikipedia among others are strategically contented to regard them as mere types and not causes .The main causes now include –leverage; Strategic complementarity and self fulfilling prophesies ;moral hazard ;Asset liability mismatch ;Herd behavior and uncertainty ; Over regulation, under regulation and regulatory failures ;Systemic risk and financial contagion; theories of financial crisis ; Games of self-coordination ;Herding models and learning models  .
But before expository perusal ,it is also expedient that  further market or creation of new market for diversification of risk spread or competitive risk spread can better handle these consequences and even avoid or reduce or where appropriate eradicate the causes .On a single day of August 21 , 1998 ,as a result of runaway or break away plain vanilla interest rate swaps  ,long term capital asset management LTCM –a large hedge funds an invention of   Nobel prize winning economists –futures and options inventors , crashed and lost over 500million dollars in a single trade .With that single collapse ,global apocalypse thus was begun which coincided with the 97/98 Asia financial crisis and in  Russia and Brazil.  
During the period –Alfred Steinherr –high finance rocket scientist published her book and examined the derivatives markets .In 1998 she noted the sheer size of over the counter-OTC derivatives market in terms of contracts outstanding stood at 80 trillion dollars At the end of 1998 had become the most important market  prone to highly contagious and virulent crisis ever experienced in history .Widespread failure of policies and successive policy regimes had persisted and aggravated this climate .To be precise in 2007  OTC derivatives market  ballooned to 600trillion dollars .Even after the storms   including losses and unwinding  that still towered above 500trillion dollars .Yet it has no oversight
We shall examine the causes and consequences of financial crisis as noted below.

Financial panic ,financial distress  or banking  panic and banking distress is not new nor restricted   to Nigeria like elsewhere around the world .Truly speaking ,financial liberalization is a global development that has come to be associated in particular with the economies where banking crisis is prevalent .However , contrary  to ancient method of finance ,there is a widespread  belief that banks occupy the very pillar of universal economic development and the bedrock of  modern civilization .Strategically ,through their indispensable roles  of monetary inclined disposition  ,wealth and financial engineering technologies and techniques such as creator of money , allocation and mobilization of savings ,principal savings depository ,financial advisory role,credit management ,financial intermediation    and the managers of the nation’s payment and settlement system ,they ve been able to oil the wheels of modern commerce .In short , based on this operative architectural mode , it can be  also regarded as the general  financier  of the economy  and the lubricator of the financial system .
Nevertheless the  Banking system and the stability of banking and the effectiveness of Banking  in an economy is quite the same as the quality of Banking regulation in that same clime ;so that alteration or enhancement in the latter has a reverberative effect on the former .In this context the conduct and the practice of banking is subject to existing banking regulation in that clime and with the growth in the quality and quantity of banking services  experimented at a particular period. This remains the ultimate risk and boon  of banking regulation hinged upon the quality of adjustments ,disclosures ,  reforms and tardy change that can be mustered at a given period .
Consequently, this entails a robust policy and institutional  platform to support regulatory quality ,regulatory arbitration mobilisable  in the mechanization of appropriate policy making process ,policy planning ,policy consensus planning , visible policy making critique and rational policy analysis under control  of its regulatory authorities .It is a major leverage in the regulatory regime of the monetary authorities being altered as deem fit to ensure regulatory and institutional sanity, soundness, efficiency and safety of the macroeconomic or financial  system at large . In this regard ,the primary responsibility of the banking regulators is basically systemic distress prevention for the purpose of macroeconomic and price stability in an economy  .This is necessary  in an attempt to safeguard  against the hurdles of Bank panic ,Bank runs and Bank distress  that can trigger  total collapse of the nation’s banking industry and its credit payment system.
Therefore the prudent  management  of assets and liabilities and the ability  of BANKS to guarantee the safety of depositors funds ought to constitute the paramount objectives of the deposit money banks as they go about  the performance of  their banking activities and the statutory role of financial intermediation .As a vital public resource for the maintenance and sustenance  of Banking confidence, it must not be impugned, as regulators avoid regulatory arbitraging and ensure institutional  compliance with the stringent provision s guiding Banking activities. Or that Banks play by the rules .The maintenance of  this confidence –a scarce resource is  required for the health and wealth of the nation’s financial system. The moment the confidence crashes our financial system also automatically crashes .Banks ‘failure  and insolvencies worldwide based on historical review had been strategically linked to such confidence fiasco and with it the bedrock of the nation’s Banks .
Sometimes ,confidence impairment   can disrupt  efficient functioning  of the financial system  especially in a volatile highly underdeveloped financial market.Since Banks are the conduit and the catalysts through which monetary policies are communicated via  the transmission mechanism  onward to the broader economy ,macroeconomic instability and financial contagion can destabilize the entire system.Banks failure can impair the health of the system .Consequently the attainment  of price stability can become an elusive nightmare as the ultimate goal of bank regulators is defeated in an unpredictable financial system .
In the words of James Akpan Adams to quote verbatim’ ’the insolvency of a bank has far more reaching consequences on the economy than mere losses to the shareholders and creditors of the Bank .Bank  distress and failures  has serious adverse effects  on economic development .For instance ,  large scale Bank failures limit the ability of banks to create money ,jeopardized the payment mechanism and disrupt lending activities’’.
Before we embark on the journey of discovery the root causes of Banking panic ,bank runs, and Bank distress it is expected and naturally  expedient in this candid section of the paper to define distress , causes identified and proffer measures for distress prevention .
In a normal parlance ,the  term  ‘distress ‘refers to an unhealthy or precarious situation .So to be precise a distressed institution is a vulnerable institution  caught in the midst of survival storm and unhealthy situation. This is an institution whose daily  practices and performance are not  in tandem or compatible with industry norms and established standards and so therefore lacks a good clean bill of health .Now let us apply this concept to the Banking industry our focal point of study and the exposition  and  review of available research literature .
                                                Banking Distress ,Causes And Prevention
Calomiris -1989 defines distress in the financial services as an unhealthy situation or weakness in the organisation’s condition that prevent it from achieving its set goals .Lenston et al -1986 concluded that the firms distress as a situation of complete or near total loss of shareholders funds .Ajasin -1993 differs and observes that it is a condition of cessation of autonomous operation and loss of continuance with the assistance of relevant monetary authorities such as NDIC.Ologun-1994 says an unhealthy financial institutions is noted by managerial weakness and severely truncated operational ability .
In a compendium ,to put it succinctly it is the exhibition of ‘’severe financial ,operational  and managerial weakness and inability to meet both owners’ and customers obligation and the rest of the economy at large-Adams-2003].When this happens at the level of individual bank distress ,its contagion can spread so quickly to infect the entire system if not quckly identified and resolved .Bank panic and Bank run from a single Bank runs can  precipitate the crash of the system if it spreads uncontrolled or uncurbed .Aja-Nwachukwu -1993;12]admits systemic  distress could result from a Bank failure in particular and spread too quickly to infect the entire system through financial contagion .This may become negative to pose some threats to the industry stability in general.Consequently  the nation’s payment system maybe affected including savings mobilization and financial intermediation services –Balino-1987]
Distress in Banking can be likened to Banking illiquidity and insolvency and the fear of depositors  for the loss of their deposits .This therefore leads to breakdown  of contractual obligation ,subject to bank panic,then bank run and distress.-Ebhodaghe-1997;57;Ibikunle-2014]This unhealthy situation begins due to bank’s inability to meet customers obligation as fall due.That is illiquidity on one hand .On the other hand , this leads to insolvency as it brazenly  manifests when Banks’realisable asset value is far below or less than its aggregate liabilities .The inability of a Bank to meet customers obligation  as an early sign of distress is a reflection of this two way factor syndrome crisis prompting  interbank indebtedness and tardy or dead  depositors withdrawal disability. Weak depositors  base ,poor management  and inability to meet requisite recapitalisation  requirement.
There also a handful  of  performance criteria  widely used  to determine the operational fitness or bank deficiency   .This build upon the basis of two factor crisis syndrome crisis  to include low earnings , huge operational cost and losses ,weak management ,poor internal controls ,insider abuse .

                              Regulatory Mechanism  And Distress  Prevention Measures
In the light of the foregoing , dual factor syndrome crisis is a central bane in a banking distress .However  regulatory measures widely used  to avert Banking crisis are technically being subject to critique by finance pundits worldwide . Inasmuch  as they have positive implication are also confronted by logjam of drawbacks  especially in a banking climate that has been  heavily  deregulated-Ibikunle-2014] .
While sect oral policy of  deregulation was seen as a means  to check  undue advantage of shareholders  and a boon to depositors .The capability of depositors on the other hand  to critically assess the Bank’s risky  portfolio can be subject to restraint driven by several factors .Adams;2003 admits that  the capability of depositors to adjust for appropriate rates  to compensate against default risk  could be hampered  in such scenario  and with deregulation may be vulnerable institutions with inherent liability structures and lulled into distress borrowing.-a condition that often fuels the dual factor syndrome crisis which can sets in and hence the crash of the ailing institution.-CBN;1995;Ibikunle;2014].
In this context ,government intervention  is rational to protect depositors fund against default risk .This insulates the system against envisaged drawbacks  inherent in market mechanism  and  a proven evidence that market mechanism is unreliable and inefficient .
There is no doubt  that  the debate  about government  intervention dates back to the days of David Hume and Adams Smith  and the generation of classical economics that followed them  and later neo-mercentalists and the former includes economists   such as J.B. Says . ,David Ricardo ,Thomas  Malthus and even before Thomas Mun ‘s Mercantilism and its followers also contributed immensely  to the importance of government intervention in the economy like the Keynesians  .This was leveraged to bridge likely failure of the market and correct its anomalies ,relative to the capability of the market to effectively allocate resource over times  .The statutory responsibilities  of  the CBN such as CBN licensing  and revocation of Banking licenses and the practice of deposit insurance by NDIC are prominent forms  of  self regulatory activities in the system .The concept of deposit insurance is embedded in its essence .If this prevent Banks from excessive risk taking it automatically also increases their chance of failing –Adams;2003;Whetlock;1992;Mishkin;1997].
Further studies have also unearthed that Banks  have greater incentives to take bigger risk and bigger bet than they otherwise could manage .or than they otherwise would  when insurance premiums are unrelated  to expected cost of  failure to the insurance  system . –Belong;1998,Balino and Sundaravajani;1991 and Adams;2003].In this context,the concept  lowers risk  and cost of deposit and wildly encourages Banks to use depositors funds to heavily finance their activities  in contrast to equity and  non-deposit liabilities .According to the studies ,Banks therefore prefer to hold riskier assets ‘’when deposits  are insured ‘’It concluded ‘’unless  regulation  hinders risk taking deposit insurance could precipitate  more  Bank failures than otherwise would be’’While Nwankwo-1989 admits the countrywide banking historical evolution is determinant of regulatory pattern in such country it might be difficult to subscribes to Calomiris-1989 that  supports a viable condition for deposit insurance that can be better exploited by strict enforcement of regulation .It is risk if one dares to believe and express disputation with the meltdown crisis in the U.S. which portends the unworkability of even regulation .To further dispute Wheecock -1992 support for effective supervision by  regulatory authorities to beat banks into compliance with legal framework as by ibikunle2014 - including its effective impact  one can critique also  leaves much to be desired often counteract public interest .Even when Bank regulators ,devise prudential standard to avoid insolvency and main banks’adjusted book value  .This followed fixed rules such as :Capital Adequacy ;Asset Quality Management Competence ;Earnings ability and Liquidity position abbreviated as CAMEL.Any adverse deviation from this critical and required standard level ,then the Bank begins to experience symptoms of bank distress –Ebhodaghe ,1997].
Methinks , the disputation is justified with the study Rojas-Suarez-1998 when it fails to exonerate over regulation.or admits sound CAMEL are not still good indicators of Bank’s bill of health sometimes induces systemic instability .Contrary to Mishkin-1997 of those who think regulators and Banks managers  have adequate knowledge ,information and sufficient resources for technical supervision and self regulatory functions better think again and such foibles can be compounded by moral hazard or the so called principal agent challenges.  Sheng -1990 unmasks the objective of supervision  tends to be destroyed by over regulation and failing depositors assets,competitive banking ,promote monetary instability and a weak financial  system.
Noel Sacasa –IMF Senior financial sector expert on Capital Market and money market department  in the piece ‘ Preventing Future  Crises ’ also admits the need for ‘effective regulation ……………to realize the potential of an open financial markets’’He further noted ‘financial innovation and integration have increased the speed and extent to which shocks are transmitted across asset classes and countries blurring boundaries between systemic and nonsystemic institutions .But regulation and supervision have remained geared towards the individual financial institutions .The regulatory mechanisms do not adequately consider the systemic and international implications of domestic institutions’ actions ’’ He therefore provides direction for proposed reform  .In what went wrong ’unraveling the crisis and what reform proposals should address and include causative factors not included needed to correct the destabilizing trends in the markets and regulation .Here he notes-First ,global macroeconomic imbalances resulted in lower interest rates during the past decade inducing more risk taking and contributing to the creation of asset price bubbles worldwide .Second,changes in financial sector structure and the failure of risk management to keep up with financial innovation during the past two decades rendered the system more prone to instability .And third ,leveraged financial institutions have inherent incentives to take on excessive risk without internalizing systemic risk which is the main they need to be regulated’’. Sacasa like previous studies all agree that with the risk of moral hard ,soft landing can be difficult and then still calls for appropriate  or effective regulation   .How effective is the regulation without understanding the foremost theoretical contraptions that underpinned these regulations as it were  over the ancient .Dealing with systemic risk or not  as to avert fast credit growth and prevent asset class bubble burst does not make regulation efficient .There is no doubt about it that modern financial products such as securitization have contributed immensely  to the risk taking tendencies and bourgeons risk of moral hazard though unarguably have improved access  to credit but the risk of volatility associated with market forces is certainly a far greater problem in the years to come .Contrary to Sacasa it is not true efficient dispersal of risk in favour of institutions that could manage them from a transfer of burden of the destabilizing shift of risks from the institutions that could not manage them ‘’to the reversion of  some of these risks  to banks that had supposedly offloaded them’’ promoting high uncertainty among participating institutions correctly counts and hardly can this  be a one size fits all .
The swing and shift in monetary policy is responsible for  the growth of credit market debt in the stormy decade under Sacasa review when some economies ran persistent current account surpluses .This led to cumulative financial assets issues in deficit countries especially  financial assets in America .Low interest rates was responsible in heightening moral  hazard and accelerated excessive risk taking and ballooned fast credit growth .Sacasa notes this ballooned households and non financial entities’ credit market debt from 118 to 173 percent of GDP between 1994 to 2007.Household credit debts since 2000 accelerated even more ballooned in seven to 136 from 98 percent .The U.K.also experienced staggering growth from 120 percent to 180 percent and in the Euro zone rose from 72 to 91 percent of GDP.Sacasa and his ilks are maiden statistical behemoth  consumers and yet could  not  grab nor come term  with  the grievous cost that monetary policy shift and its excessive regulation can   cause or  is causing the modern markets.It is the central motivation of excessive risk taking  and asset price inflation and the best structural changes that can be to avoid Adam Smith theory of market forces  and can save  modern free market economy from total crash.This structural abstinence can allow all modern reforms to work in the long run when market forces are replaced by market rational forces .
Almost all recommendations and resolutions proffered to end banking and financial crisis dwells solely on the need for efficient regulation and nothing more and to be bemused that it is the primary catalyst and panacea cannot be nothing more  than hallucination and object of malediction inviting the new round of crisis .  With these new technological trends financial institutions can excessively regulate and  manage themselves and disregard systemic risk and leverage can increase moderately without burden of asset price bubble burst and with flat interest rates and trading of  micro financial assets , where virtually all credit sectors are supplied to bridge inequality of wealth in modern society .This allows for  holistic review of financial market ,its system and its restructuring to adopt marsolist macroeconomics  .
 Cross-country data analysis by Balino-1991 and empiricism of banking and  financial crisis from Argentina to Chile ,Malaysia ,Spain ,Philippines to Thailand and Malaysia inspite of diversity of antecedence observed similar trends .This evaluates the macroeconomic condition causing distress ,the regulatory framework ,the intensity of the crisis and standard approaches  .The findings revealed following challenges ;weak management ,inadequate capital base ,poor asset quality and liability management,political interference, macroeconomic instability , fraud and insiders abuse ,inadequate legal framework ,delayed supervisory method of actions towards bankrupt institutions.In Argentina , the decline or loss of loan portfolio which feeds from general economic development environment..
                                                              The Eurozone Debt Crisis
The still exploding global financial crisis  started with the credit crunch in the United States and the crash of subprime mortgage market during the summer of 2007 and became much intense in September 2008 with default by 140 years old Lehman Brothers and having undergone different phases spilled into the real economy and global economy at large evidenced by ongoing recession in almost industrialised economies .With the cheap interest rates leveraged policy ,has monetary like fiscal policy been better having countered the menace with unprecedented vigor ?Why would  fiscal policy be allowed to widen public deficits only to set up bail out packages to rescue failing financial institutions inspite of rebounded economic activity of 2010 and what happened thereafter?
Now in 2011 tensions in sovereign debt markets accelerated with the concern of long term debt sustainability worldwide given the fact most of  these countries entered the market crisis with huge public and private debt .This further aggravated the scenarios threatened financial and macroeconomic stability  as most financial institutions heavily traded the troubled government bonds .Government debt to GDP ratios are now much higher than before  the crisis and historically high with the benefit of guarantees added more potential liabilities  With the growth of ageing population which a rising cost for the states over the next 3 decades ,there is evidence this problem can be worsened with the growth of public debt .In a cursory look at the State of public finances in the Euro area according to IMF debt to GDP ratio ranges or varies markedly acroos the region.In Estonia is about 6 percent ,152 percent in Greece-the  worst economy in western Europe in 2011 and about 87percent aggregate in the Euro area .Nevertheless the public debt burden is a global issue ;in the U.K. stands at 83 percent,100 percent in the U.S.and 229 percent in Japan.This can be a great burden to central bank in view of its ability to maintain price stability at all times

Moreover ,the Eurozone debt crisis can be linked too much dependent on foreign capital and that ‘s the same problem that precipitated  the Latin American crisis of the 90s especially Argentina ,Asia 97-98 financial crisis,   and later the meltdown .Not understanding how to restructure knowledge and macroeconomic cycles can be major problem and of course it is as they profited cheap capital guaranteed by monetary authorities. Although inflows of capital is from the Eurozone but it has subjugated the capability of the borrowing governments to handle turning surpluses into massive current account deficits as crisis deepened. Almost all the country in the region are inmesss of spiraling deficits now with the emergence of the Eurozone over the years and only Germany seemed to be enjoying the show of a creditor nation.The sovereign influence of the Eurozone countries is fast eroding with the slide into obscurity of their financial independence

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