Banking Industry

Introduction

There are large economies, whether it is advanced, developed, or developing, have fallen in the issue of recession. Many industries suffered in the global impact of recession. Moreover, the financial flows, employment, and trades are the main target of the recession, and each country is struggling to stabilize their economies (Terrones, Scott, and Kannan, 2009).

The “great downturn” caused by the recession was experienced by the firms that formalized their plans in expansion. It is because, the financial crises had been more severe and the constraints are indeed needed to keep the usual business cycle on-going. Recessions, in every part of the world, became longer and deeper and the recoveries are barely unseen. Therefore the global response to the world-wide recession is much anticipated and must be recognized.

Background: Banking Industry of Singapore

The banking sectors, not only in Singapore but also in other countries, already experienced the downward pressure and slowing activity that led to the price deflation. It is identified that the liquidity and funding problems in most of the banks and other financial intermediate players are the part of the growing hindrance in recovering against recession.

Depositors were concerned about the declining net worth and balance of their banks, and to avoid future consequences, they tend to withdraw their savings (Terrones, Scott, Kannan, 2009). This is not only the major problem, the fall of the financial or banking sector is the answer that they created to fill the depositors’ reactions. Banks thought of making a strategy that will gain at least half of their loss, many banks provide their financial systems with the idea of liquidity and imposing lower rates which in return did not met their expectations.

Research Focus: Recession or Recovery, the Need for a Global Response

The study is mainly focused in the banking industry and its performance in Singapore. Although the Singaporean banking industry reported the lower net profits by the end of 2008, the leading banks in Singapore however slowly increased their assets due to the market uncertainties of the country. Singapore’s economy is viewing a better future in the midst of recession through the continuous banking activities and financial services.

There should be a strong approach for recovery to be make the business cycles and financial systems back to normal, maintain, and aim for development. Because of the economic downturn, the action of implementing credit controls that eventually reflected on weak banks loans is not unusual in the presence of the recession (Brusca, 1992). Logically, banks are not making loans, but they are still holding the loan rates higher than the costs of the funds. With these standardized action imposed during recession, many firms as well as individuals have suffered due to their bad outstanding balances.

The banks’ processes are part of the banking procedure but implementing this kind of technique will only lead them to more recession than recovery. Therefore, banks in Singapore should find a better way where they can serve people and avoid the deeper and longer suffering on recession.

Aim and Objectives of the Research

The research is aimed to identify the appropriate response of banking industry on the recession. The creation of such response will make the banking industry applied their traditional transactions and serve the people and firms at the same time. The research’s aim is fueled with the following objectives:

- To create a stabilized and strong banking industry in Singapore.

- To avoid the future consequence of the recession in the country.

- To support the financial system that can answer the economic crisis.

Research Questions

These are basic research questions to formulate the methods or strategies in Singapore’s Banking Industry.

(1) What are the impacts of recession in the Banking Industry of Singapore?

(2) What are the statistical regularities that was implemented to reduce the recession’s impacts and to help the Banking Industry to recover?

(3) What are the other recovery strategies or global response to the recession, most especially in Banking Industry?

Research Hypothesis and Value

Every research believes that the creation of methods and appropriate solutions is worth nothing when the people that serves as the propellers of the banking in not knowledgeable enough to compete or otherwise, make their own decisions. With the applicable knowledge and skills of these people, the success of the research will be recognized and can possibly be applied in any other business sectors or industry.

An effective and continuous recovery of banks form recession is considered as a vital step in finding solution on the next generation’s wave of recession. The global response to the recession in banking industry is an opportunity to other industry that all acts as the drivers of economy to achieve the economic stability in Singapore.

Literature Review

The situation faced by the banking industries is similar to the domino effect. When the bank did not support the needs of the business industry for their further growth and expansion, the firms themselves can experience the impact of recession. The firms cannot create or only have limited financial support to continue their business cycle, and this may contribute to the overall economic crisis.

Banks has been an important partner of every business, whether they are engaged in manufacturing or servicing. It is because only the banks can provide the credits that can be used to provide resources and technological machineries of the firms (Geroski and Gregg, 1993). As stated earlier, banks imposed credit controls and yet provide high interest rates (Brusca, 1992). But if the banks did not place any control in their credit policies and decided to impose lower rates, then they will also soon face the financial crisis because of the saturation of the funds (Terrones, Scott, Kannan, 2009). If the banks choose either of the two traditional strategies, they will still end up suffering in the black hole called financial crisis.

Appropriate Methodology

The banking industry in Singapore is slowly recovering from the recession and its impacts on their financial system. To support their recovering strategies as well as the future development plans, the strategic response is created as a method to deliver the wide-broad responsibilities. (OECD, 2009)

Banking industry should first consider the power of their financial system in the governance. A strong and effective regulation is nothing if there is a failure in either or both market and policy. Banks should find the strong support of the government in answering the financial crisis. Banks should consider the aspects that might cause them risks and then afterwards, create solutions. The banks should identify or investigate the uneven treatment of financial institutions, depending on the degree of the operation. Moreover, it should be clearer to the banks whenever the company is engaged in merging and acquisition because this is one of the main reasons in managerial chaos and down fall. With these aspects, the banks can measure the funding expenditure that might occur during the business’s life-cycle.

Banks should also educate the consumers for their own protection. They must inform the clients about the basic issues and the true costs of the credit as well as its essential. And to support the long-term growth of the banking industry in recovering from recession, banks should keep the flow of currency by keeping the markets open to all. Banks as a business type should establish a reliable policies and technologies that somehow, can prevent the spread of the crisis.

Data Collection Methods, Ethical Issues and Limitations

The response will always be based in the collected data taken from the banks that experienced the recession and attempting to stabilize the financial system. The data are based in the ranges of the banks that actively engaged in financing support. Each bank will be interviewed according to their performance before and after the recession touched the banking industry. And through that, the applicable methods or strategies will be transformed for the banks own use.

As part of the ethical issues of the research studies, this might serve as a challenge for the banking industry to put their full effort in stabilizing the financial system and contributing for its future growth. The limitation of the research is detailed in collecting the data needed. Only the banks in Singapore that are engaged in loaning services are advised to apply any methods in their procedures. The other financial sector might consider applying the said method but the possibility for conflicts is present, since most of the financing sectors are not stabilized before the appearance of recession.

In-Depth Analysis and Conclusion

There is no such thing like great solution in every industry. The great solution only made and existed because of the push of the people that struggling against the effects left by the recession. With the combined knowledge and ability of the said people, the positive outcome might be experienced, not in an instance but in continuous process. Singapore is a newly industrialized economy together with the Hong Kong, China, and Korea and experienced the hard hit of the falling global trade volume. The use of fiscal measures to stimulate the economy is great (ADB, 2009). The creation of the response toward the recession is an initial step to make the economy recover from its drastic outcome especially in banking industry.

References:

ADB, (2009) ADB’s Response to the Global Economic Crisis: An Update (Asian Development Bank) [Online] Available at: http://www.adb.org/Documents/Policies/Global-Economic-Crisis/in221-09.pdf [Accessed 02 Dec 2009].

Brusca, R., (1992) Recession or Recovery, The Challenge Journal, 35(4)

Geroski, P., & Gregg, P., (1993) Coping with the Recession, National Institute Economic Review Journal, No. 146

OECD, (2009) OECD Strategic Response to the Financial and Economic Crisis; Contributions to the Global Effort (Organization for Economic Co-Operation and Development) [Online] Available at: http://www.oecd.org/dataoecd/33/57/42061463.pdf [Accessed 02 Dec 2009].

Terrones, M., Scott, A., & Kannan, P., (2009) World Economic Outlook: Crisis and Recovery – Recession to Recovery: How Soon and How Strong? [Online] Available at: http://www.imf.org/external/pubs/ft/weo/2009/01/pdf/c3.pdf [Accessed 02 Dec 2009].