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  • Financial markets

Click to read the article below and then answer the questions:

UK government to sell next £1bn stake in NatWest

  • The article refers to the ‘US subprime mortgage market.’ Explain what is meant by a subprime mortgage

  • The 2008 financial crash has its origins in the USA; however, it proved highly contagious. Explain the meaning of the term systemic risk

  • Limited liability in a bank means that owners have an incentive to take risks. Explain what is meant by moral hazard

  • Banks suffered a devastating decline in confidence and with that came the inevitable bank run. Explain what is meant by a bank run

  • ‘Banks had become too big to fail, too big to sail, and too big to jail.’ Banks were bailed-out at great expense. Outline the measures subsequently introduced by the Bank of England to ensure that banks are strong enough to withstand another financial crisis, so-called stress testing

Gavin Clarke, Emmanuel College

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