Financial Crisis Review V0443

Running head: The Comparison of people’s Attitudes Towards Financial Crisis from 2008 to

now 1

Impact of Financial Crisis

(Author’s name)

(Institutional Affiliation)

(Date)

Impact of Financial Crisis 2

Abstract

The crisis of the banking system in the year 2008 did affect different societies globally.

The economy was expected to continue growing but it did decline as the rate of unemployment

rose, there was a rise in the of debts which led to the loss of confidence by the political leaders

who thought they could not manage well their problems. The banking system did fail the people

and the people did lose confidence. According to analysis all the people 100 percent were

worried about the assurance of banks. The financial crisis led to poor performance of

investments. Capitalism of many investors around the world is tied to the market. The savings,

cost of properties and stocks and shares are what drives the investment and all this had a negative

effect on the economy. There were decreased levels of the interest rates and this therefore

reduced rate investments. Thirdly, the impact led to increased anxiety in the way the banking

system and the growth of the economy of the country. The concern showed that the people were

affected negatively and their attitude towards the growth of the economy was negative. The

British people did not believe anymore in the management of the banking system. Lastly, the

data shows that every British citizen had been affected by the financial crisis and their negative

attitude rose because they had to pay high taxes, therefore, reducing the disposable income for

every British adult citizen.

Table of Contents

Abstract .......................................................................................................................................... 2

Introduction ................................................................................................................................... 3

Financial Crisis Review 2007,2008 and 2011 .............................................................................. 4

General Historical Background to RBS ...................................................................................... 5

Impact of Financial Crisis 3

Compare and Contrast Before and After Impact of Financial Crisis...................................... 6

Public Reaction and Response to Bailout RBS .......................................................................... 7

Data and Hypothesis ..................................................................................................................... 8

Compare and Contrast 2008 and 2018 Results ........................................................................ 10

Summary ...................................................................................................................................... 11

Outlook......................................................................................................................................... 11

References ................................................................................................................................. 13

Appendix ................................................................................................................................... 15

Introduction

The financial markets in the World are the backbone of a well-functioning economy.

They enable the directing of capital resources to its most productive use in the market. More the

financial market allows the pooling of risks in the market by providing an insurance policy

against the negative effects in the markets. This allows the investors and the manufacturing

companies to maximize their resources for a stable outcome and thus growth in the economy.

Furthermore, the positive transformation liquidity of a country can grow when there are a

financial intermediation and the sharing of risks. Individuals are allowed to bank their savings

with a trust that they will use it at any given time and with the long-term investment they are

assured of an illiquid investment. According to King and Levine, the countries with high growth

in the financial markets, are always assured of a faster development of industries and improved

Impact of Financial Crisis 4

technology, more so, they tend to rely on the external funds to improve the rate of investment in

the country. The failure of the Royal Bank of Scotland in the year 2008 has been a great failure

to the UK citizens because of the large costs. The financial crisis has been affected mainly by the

recession of the economy of the UK which the Royal Bank of Scotland had played a very

important role. The recession period had increased unemployment rate in the country and the

loss of wealth and income. The continuous effect to the market has led the market to continue

struggling with the economy of the country.

Financial Crisis Review 2007,2008 and 2011

The financial crisis has been a concerning issue to the people in the world since 2008.

The Economic of the World has suffered its growth since the consumers, the manufacturers, the

financers and other parties’ organizations involved are unable to control their finances because

they are the ones who decide how to run the economy. The lack of a stable economy does affect

their daily program of effective services and maximization of profit. The research shows that the

effect of the financial crisis was as the result of liquidity, currency, instabilities of the Banks

shares prices and the risks in businesses with banks (Hung, 2012). The labor market has suffered

a major blow, the allocation of capital into various channels has been a great issue. In the

manufacturing and mining sector, there has been low productivity due to the misallocation of

resources. The manufacturing sector has the high productivity compared to other sectors. During

the financial crisis, there has been lack of job creation, unemployment level is lower and this

results to lower output in the economy. The large impact of financial crises can result in long-

term unemployment in the labor market because of it will be difficult to reintegrate the

unemployed workers. The financial crises are avoidable with the right policies presented to the

Impact of Financial Crisis 5

economy. The people around the world do more risk-taking and excessive investment which the

outcome does affect the economy. More so inflated prices in assets does increase liquidity. With

well-presented financial regulation conduct, will surely generate higher growth, therefore,

improving the stability of the financial status in the economy (Landsman, 2010).

General Historical Background to RBS

The royal bank of Scotland is an effective bank which was started in Edin burgh in the

year 1727. All this brand all start small but only to grow up to perform banking services to

people. The royal bank of Scotland is made up of almost 700 branches which are mainly situated

in Scotland and maybe few are situated in various cities in England. The bank traces back in

1707, the time of its origin in a society of the subscribed equivalent debt. The growth of the

company grew until its overdraft in 1728 which was considered. Competition is the reason why

organization keep producing better services and to continue to reach the market. In Scotland,

there was a lot of competition to date and during the origin of RBS, the main competitors were

the old and the new banks, they were effective in banknotes which were the main deal back then.

However, the RBS did surpass the banks b redeeming its notes again. The expansion of RBS

started in Edinburgh in 1783 where the first branch was created and more branches followed to

be able to provide efficient banking services around the country. Due to expansion, the bank had

to relocate to Dundas house to accommodate its services. The bank did not just settle therefore

but went miles in England, the expansion of the British Empire has been successful as it has

made London one of the largest financial centers globally (Shin, 2011).

Impact of Financial Crisis 6

Compare and Contrast Before and After Impact of Financial Crisis

In both the people there is poor performance in the investments because most investors

scare away from a recessive economy. Before there was hope for the banking system before its

collapse in 2008. The failure of Royal Bank of Scotland made the citizens go through

unemployment, high payment of taxes and more so, the experience leads them to have a worry of

their savings in the Banks. The difference lies in the attitude the rose before the failure of the

Royal Bank and after. Before the failure, there was hope the Banks would overcome the

recessive economy but due to too many debts and poor investments, the banks did fail and

therefore consequences followed. The people got a negative attitude on the growth of the

economy. The citizens that lack trust in their own country shows the lack effective performance

to produce and satisfy the citizens. The differences come in after the financial crisis the

government takes initiative to try and solve out the problem. The government has to help to

improve the economy of the country so as to progress the level of employment, improve savings

and more so investment.

According to the interview with different households, there was the group that felt they

had been affected by the crisis while the other group especially the employed ones felt the crisis

had no impact on them. The behavior did change because most of the reported citizens who

reported to be affected were few compared to those who were good with it. The few covered

24% while the other group represented the 76%. The 24% did not complain about the faced

losses maybe because they feared to lose their jobs and face the consequences because most of

them depended on their current employment to take care of their daily needs. Those with high

payments did not feel the crisis while those dependent on their salary the expenditures did affect

them. Most of the sample taken was concerned with the inflation in the economy. Their other

Impact of Financial Crisis 7

sample are those that are affected by the crisis though majority did respond not be affected

however, there is a bigger collection that did get affected by the financial crisis therefore, my

opinion is, whether there are a number of those that are affected, some losses employment or

material possession or another party gain from the financial crisis period they tend to depend on

their income and this will always affect their attitude as long as the situations are still the same

(Cull, 2013).

Public Reaction and Response to Bailout RBS

The bank suffered a big blow of high debt which the management could not handle to

help the bank grow back to its working ways. The Royal Bank of Scotland is known for its own

effective performance and one of the best in the bank. The citizens were not ready to let the

image and the brand end. The citizens were ready to pay up high taxes that enabled the

government to pay up the debts created. The politicians took into consideration to come up with

ways to help the bank during its crisis. According to Gordon Brown, the former prime minister,

did support fully the handing of billions to the Royal Bank of Scotland and other banks that had

suffered the same fate. Other European leaders were also interested in the growth of the bank

back to its feet. The public still had confidence at list 13% continued with banking and believed

in the products and services of the bank during 2008 to 2009. The difference between now and

the past is that the people have increased trust and have become more confident in the banking

industry. The confidence of the Royal Bank of Scotland has improved so far though there is still

struggle for confidence (Zingales, 2008).

Impact of Financial Crisis 8

Data and Hypothesis

I did interview 25 people who had different attitudes on the financial crisis in Scotland.

The 20 did represent those above average income and the 5 were invalid. The standards used to

collect the data through the number of age and more so the income they were earning.

Determining this selection really helps to determine the attitude of the people towards the

financial crisis because most of the people were affected according to these problems. A

questionnaire had to be presented to the selected group they could fill in the presented questions.

As from the data presented most of the age of the people did range from 20-30 years old. This

was mostly youths whose expenses are still dependable on income. They are believed to have the

highest number that was affected by the financial crisis. The question in the questionnaire was

about what they had felt did influence the financial crisis. The Bank did influence most of the

financial crisis in the country, 70% picked the bank as the main problem to the poor economy.

The 20% picked the real estate to believe that there were excessive investments in the real estate

and did leave the country with too much debt to handle. The financial crisis did have a large

impact on the life of the people (n=13 picked yes, 6=no). The data collected on the attitude of the

banking industry was categorized into three parts with different opinions (n=5, getting worse,

n=5 moderate and n=3 well). The financial crisis affected the bank's reputation as the people lost

faith to the services provided by the banks (n=5, yes and n=4 depend on the situation). Almost

80% of the people did believe the banks should be protected when a financial crisis happens to

protect its image in the working environment. Currently, does the trust of our bank services still

exist in the society (n=18 yes and n=2 No) The trust in the bank services has improved due to the

improved services they have provided over the years and the government intervention has

brought trust back to the people. The attitude towards the Royal Bank of Scotland is medium as

Impact of Financial Crisis 9

from the data collected (n=10 medium, 8=satisfied and n=2 dissatisfied). The government has

learned from its mistakes which led to a recessive economy (n=18, yes and n=2 No). The

ignorance of the government to initiate policies to control the growth of the economy really

costed countries growth. The government has come up with a different approach to help solve

the financial problem (Willmott, 2012).

The questionnaire had a maximum of 25 people who were willing and ready to comment

on their feelings towards various issues they did experience since the financial crisis happened.

Th outcome was good because most of the data collected 80% of the people did change their

attitude towards the banks status and were ready to continue with the savings in the financial

institutions. The other 20% are the households who did depend on their income to deal with their

daily demands. The expenditure did increase after the financial crisis because the government

had to come up with ways to solve the financial crisis through the making of policies. The

increase in tax collection did affect the citizens who earned less income as they had to direct

their disposable income in the ways of solving the crisis. The safeties of the savings in the

account was worrying as people took time to continue with their savings. The government has

measures that have enabled the country to share out the problem because leaving the issue to the

banks and the investors could create more burden to pay the debts and could risk the growth of

the economy in the near future. The economy will take time to grow as the big debt and the poor

investments will have to be implemented again. Proper advice to the management of the different

organization has influenced the effective performance of industries to avoid same issue

happening again.

Impact of Financial Crisis 10

Compare and Contrast 2008 and 2018 Results

In 2018 there has been an improvement in the success of the Royal Bank of Scotland has

been the tremendous as the faith of people towards the growth of the bank has been positive. The

bank has seen more profits as compared to the financial crisis where the people were afraid to

invest in the bank. The profits have grown up to 752million euros while in the financial crisis

there was a big loss of up to 7 billion euros. More so, the banks show stability in the

management as they are operating with a profit of around 2.2billion euros. The success of the

bank proves the people’s attitude did change towards saving and investing. Investments are the

key to a growing economy. As compared to 2007, the bank has better facilities which have made

services more effective. According to Ross McEwan, the bank has come up with more legal

issues that defend the clients when a final crisis occurs and this as compared to 2008 financial

issue will make the clients feel safe with their investments and savings in the bank. The

investors have increased in number as the Royal Bank of Scotland has allowed the selling of

shares at a low price which is going to take the big cut out bank’s 2018 profits. The bank is

selling the shares at an average 4.5% at 2.69 euros (De Haas, 2012).

There is a difference between the 10 years since the financial crisis happened. The bank

had to take a step to improve the services and the way it has worked before. Th financial crisis

was an eye-opener to the countries poor performance in terms of investment and corporate

management. The poor decisions by firms to invest more in real estate which in the current years

have a flooded market. The debt in the bank was growing so fast and the bank could not pay the

debt on its own. The attitude of people changed and there were low investments and savings due

to the safety of resources. The Royal Bank of Scotland builds up its own image from the

financial crisis through having new management in control. Improving services to the people by

Impact of Financial Crisis 11

encouraging the buying of shares at a low price, giving out the safety of cash in the banks. There

have been profits all through meaning the bank provides effective services to the people and to

make sure the clients are satisfied with their services. Moreover, the trust and attitude towards

the bank are positive because those that did feel to be oppressed by the recession period are now

good because the economy is growing and the government has put measures to avoid such an

issue in future (Hodson, 2009).

Summary

The questionnaire did interview a data of 25 people whose attitudes towards the Royal

bank was different according to their views. Our main findings were the most of the citizens felt

materially unaffected by the financial crisis. They were only worried about the cases of inflation.

The attitude of the people did change with time but most of them were moderate because they

still believed in the effective performance of the bank and the economy as a whole. The first 10

people did feel their job security was really in need because of the most organized in order to

reduce expenses because of the recession period. The first group had less income and felt they

could lose their jobs if the companies decided to reduce the number of workers. The second

group which did consist of 8 were safe and did not want to respond to the different changes that

were impacted by the financial crisis.

Outlook

In this paper, the analysis is presented differently in different sections. The first section

presents the financial crisis and its impact on the attitude of the citizens in the country.

Furthermore, the analysis of the questionnaire will consider both the groups that were negatively

affected by the financial crisis and also those that never felt the impact of the crisis. The growth

Impact of Financial Crisis 12

and sustenance of the Royal Bank of Scotland is the main agenda to focus on to see whether the

behavior of the people will change even after the recovery of the economy and more so their

interest and confidence towards the Royal Bank of Scotland.

Impact of Financial Crisis 13

References

Impact of Financial Crisis 14

Erkens, D. H., Hung, M., & Matos, P. (2012). Corporate governance in the 2007–2008 financial

crisis: Evidence from financial institutions worldwide. Journal of corporate

finance, 18(2), 389-411.

Kirkpatrick, G. (2009). The corporate governance lessons from the financial crisis. OECD

Journal: Financial Market Trends, 2009(1), 61-87.

Barth, M. E., & Landsman, W. R. (2010). How did financial reporting contribute to the financial

crisis?. European accounting review, 19(3), 399-423.

Acharya, V. V., Gujral, I., Kulkarni, N., & Shin, H. S. (2011). Dividends and bank capital in the

financial crisis of 2007-2009(No. w16896). National Bureau of Economic Research.

Cull, R., & Peria, M. S. M. (2013). Bank ownership and lending patterns during the 2008–2009

financial crisis: evidence from Latin America and Eastern Europe. Journal of Banking &

Finance, 37(12), 4861-4878.

Tse, T. (2011). Shareholder and stakeholder theory: after the financial crisis. Qualitative

Research in Financial Markets, 3(1), 51-63.

Engelen, E. (2011). After the great complacence: Financial crisis and the politics of reform.

Oxford University Press.

De Haas, R., & Van Horen, N. (2012). Running for the exit? International bank lending during a

financial crisis. The Review of Financial Studies, 26(1), 244-285.

Hodson, D., & Quaglia, L. (2009). European perspectives on the global financial crisis:

introduction. JCMS: Journal of Common Market Studies, 47(5), 939-953.

Wolf, M. (2014). The shifts and the shocks: What we've learned--and have still to learn--from

the financial crisis. Penguin.

Impact of Financial Crisis 15

Nanto, D. K. (2009). Global Financial Crisis: Foreign and Trade Policy Effects. DIANE

Publishing.

Glynos, J., Klimecki, R., & Willmott, H. (2012). Cooling out the marks: The ideology and

politics of the financial crisis. Journal of cultural economy, 5(3), 297-320.

Zingales, L. (2008). Causes and effects of the Lehman Brothers bankruptcy. Committee on

Oversight and Government Reform US House of Representatives.

Appendix

Impact of Financial Crisis 16

The table presents detailed grouping of the attitudes of the people.

NO CHANGE

CHANGE

Negative Impact A1 Immediate loss, no respond B1Immediate loss, no

respond

13 Ian and Peter 3. Self employed

Government intervention 3. public employees.

2.no Government intervention

18.yes

Prospective loss, job security prospective loss, no job security

10. feared their job loss 8. Self-employed.

satisfaction satisfaction of banks

10. medium 8.satisfied

2. dissatisfied

Protection of Banks Protection of Banks

-High level concerns

Neutral Impact -low level concerns 4. Depends on the situation

5. self-employed.

Impact of Financial Crisis 17

5. feared inflation.

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