ilibrium value" at which the quantity of dollars demanded (by foreigners interested in doing business in the United States) just equals the quantity of dollars supplied (by US residents who want to do business in other countries.
With the Asian currency crisis much in the news, and a disturbing array of headlines discussing what seems to be an almost daily rush of bad news for financial advisors and managerial accountants, it is necessary to clear up what has really happened, and what that really means (Ball, Branegan, Gibson, & Satsuki, 1995, 46). This fluctuation in currency values is not the only problem facing international bankers today. Also discussed in this paper will be the fact that depositors are not content with the meager return from a savings account and are finding that they can do better elsewhere, in money-market or other mutual funds.
Corporate capital requirements are increasingly being met through bond issues and commercial paper--shorter-term IOUs issued by companies and held by investors. Banks are burdened by the cost of maintaining capital reserves as security against bad debts. "Securitization," the packaging of various individual debts like mortgages into bond-like units that can be traded, has spirited off to the marketplace assets formerly carried on bank balance sheets. Banks, particularly international banks, are responding to the various challenges by recognizing that "lending" is a dwindling part of their business and by seeking new activities such as issuing and trading, which promise long-term growth.
This paper will analyze these problems in three major sections: 1) HISTORIC BANK FAILURES, summarizing the recent history and causes of banking failures around the world; 2) THE ASIAN CURRENCY CRISIS, providing an overview of what the countries' banks have done and why they did it; and 3) CONCLUSIONS AND OPINIONS.
The year 1974 saw failures of two major international banks, Ban...