The word ‘Subprime’ was voted the word of the year in 2007 by the American Dialect Society. And fittingly so. Subprime crisis remained the most talked about and debated issue among policymakers, central bankers, media and the public, not just in the US but in other continents like Europe and far-off countries such as China and India. The fears of a contagion effect became evident after the British lender, Northern Rock, disclosed in September, 2007, that it sought emergency funding from the British central bank, Bank of England. But it was BNP Paribas, France’s top bank, which set the alarm bells ringing across Europe as it froze 1.6bn euros ($2.2bn) in August, 2007, citing the problems in the subprime market which prompted the European Central Bank (ECB) to add emergency liquidity. The crisis has impacted the who’s who of financial institutions-from Citigroup to Merrill Lynch in the US to UBS, BNP Paribas, Swiss Re in Europe, from Mitsui Financial Group and Sumitomo Mitsui in Japan to Industrial and Commercial Bank of China to Bank of China. Even some of the Indian banks have been hit by the crisis although the extent of losses is small as compared to the US and other international banks hit by the crisis. The effect of subprime crisis is felt across a wide spectrum of industries. Hence for now, the challenge before the central banks across the globe is to prevent any further damage to the financial services sector and hence the global economy. The book offers insights into the world of subprime, tracking its development since its evolution to the recent crisis and its after-effects, and the remedial measures needed to prevent such crisis in future.
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