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Shrinking Banking Sector in the Age of Globalization

The global dynamics of business are changing with huge consequences for the international trade and commerce industry. One of the biggest changes taking place is in the financial sector. The banking industry is going through one of the worst periods in its history and is unable to cope with the demands of globalization. This crisis in the banking sector has naturally slowed down the pace of globalization.

In recent times we have witnessed unprecedented failures within the banking sector. According to the European Central Bank (ECB), the banking sector has been dealt a blow due to two cardinal grounds. One is the surging problem loans. There has been an increased lending rate in these financial institutions. Unfortunately, a good number of beneficiaries take too long to return the borrowed money. As a result, numerous banks are left with empty accounts. Another reason attributable to failure of the banking sector is the sinking economy of the Euro Zone. The 2008 recession that hit the economy has affected not only banks but also other money generating institutions within Europe. In consequence, borrowers are finding it so difficult to make money and pay their loans.


In his recent statement, the ECB President was categorical that the previous year saw many banks undergoing difficult moments. In fact, a good number of them faced closure. The major victims of the slump were banks in countries that experience a high rate of unemployment. Amongst them are Spain, Portugal, Italy and Greece; just to mention a few. Even though developed countries like Germany have struggled to withstand this banking problem, it is evident that they are almost succumbing to pressure, too. For instance, Germany’s public banks including Landesbanks are facing a monumental crisis emanating from debts owed to it by shipping industries among other sectors of the economy. It is on record that Germany is good at castigating banks of other countries while burying its head in the sand. That is why the report by the European Central Bank warns that Germany could also join economies that are experiencing a sporadic slump of the banking sector.

A glimpse at recent statistics shows that the United States is not an exception to this turmoil either. It is facing the banking crisis at the same scale. For instance, the year 2013 has so far seen 15 US banks getting closed down with the latest being the Nevada Bank. The US banking sector started facing this problem as early as the year 2010 when 157 banks were closed down. The following year, 91 banks were closed down before further 52 banks shut their doors in the year 2012. The trends indicate that bigger crisis maybe inevitable in the near future.

To save this situation, many countries have engaged in boosting their economies. This is the only way that shall financially empower citizens as well as lending institutions. Strict measures are being put in place to ensure that lending is regulated. That is why the ECB plans to work as the main regulatory body for the Euro Zone lending institutions. It is with tremendous optimism that these measures shall see the financial institutions recover from the enormous crisis crippling them in this era of globalization.

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