Strategic issues in banking and insurance Essay

Strategic issues in banking and insurance - Essay Example In developed world where most of the sector is de-regulated and enjoy substantial degree of freedom and autonomy, political influences may not be there however, in developing countries, this may not be the case. Developing countries do not have very well grown financial sector and most of the institutions are either directly owned or controlled by the government themselves or governments have the substantial share in them. This allows the government to largely influence the banks especially to engage into practices which may not be in direct interest of the deposit holders of those banks. The era after 9/11 have seen a new shift into the industry in terms of influence of political forces on it. The anti-money laundering rules, terrorist funding etc were some of the key strategic issues which put extra pressures on the banks and insurance companies to devise methods and strategies which can effectively help in tackling issues like illegal money laundering, channeling of funds through SWIFT etc to the supposedly terrorist organizations etc. The current economic trends especially the crisis emerged due to the subprime mortgages is considered now as one of the great strategic challenge faced by most of the players in the financial sector industry. Subprime mortgages are considered as the threat which has largely been created by the banks themselves as they tend to violate their own prudent lending policies in order to capture the market. This has therefore provided them an opportunity to earn at the cost of incurring high cost. â€Å"Sub-Prime lending typically has been characterized as lending at relatively costly interest rates and fees to credit impaired or otherwise high risk borrowers.† (Lax, Manti and Raca). Subprime loans are among the newly popular mortgage products, such as interest-only loans, for people with strained budgets, including first-time buyers. Homeowners increasingly use them to refinance and consolidate household debts