NAME XXXXXXXXXX
DEGREE BA (Hons) Business Administration
TUTOR Lavinia Wilson-Youlden
TITLE Future Direction of the International Financial Safety Net in International Economy
DATE April 2014
CAMPUS Newcastle
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STUDENT No: xxxxxxxxx
Project submitted in partial fulfilmentof the requirements of the
BA (HONS) BUSINESS ADMINISTRATION
of Northumbria University
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DECLARATIONS
I declare the following:-
(1) that the material contained in this Project is the end result of my own
work and that due acknowledgement has been given in the bibliography
and references to ALL sources be they printed, electronic or personal.
(2) the Word Count of this Project is: Section A: 4202
Section B: 5809
Reflective Statement: 628
Total Word Count: 10639
Turnitin Similarity: 11%
(3) that unless this Project has been confirmed as confidential, I agree to
an entire electronic copy or sections of the Project to being placed on
Blackboard, if deemed appropriate, to allow future students the opportunity
to see examples of past Projects. I understand that if displayed on
Blackboard it would be made available for no longer than five years and
that students would be able to print off copies or download. The authorship
would remain anonymous.
(4) I agree to my Project being submitted to a plagiarism detection service,
where it will be stored in a database and compared against work submitted
from this or any other School or from other institutions using the service.
In the event of the service detecting a high degree of similarity between
content within the service this will be reported back to my supervisor and
second marker, who may decide to undertake further investigation which
may ultimately lead to disciplinary actions, should instances of plagiarism
be detected.
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(5) I have read the University Policy Statement on Ethics in Research and
Consultancy and the Policy for Informed Consent in Research and
Consultancy and I declare that ethical issues have been considered and
taken into account in this research.
SIGNED: ..........................................................
DATE: ..............................................................
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ABSTRACT
This professional project consists of section A, section B and reflective
statement. Section A suggests results of four psychometric tests, and then
reflects the results to author’s future career. Section B suggests literature
review related to author’s future career and major.
Section A, which is the first section of this project, consists of two parts.
The first part focuses on the psychometric tests’ results and implications of
them. The second part focuses on the implications for author’s future
career by reflecting the results from the first part. For them, in the second
part, importance of lifelong learning and transferable skills are covered,
and author’s career choice is justified by considering the first part.
Section B provides literature review related to author’s career choice and
major. The main objective of this study is to examine the importance of
International Financial Safety Net (IFSN) and how IFSN has worked and
what need to be improved. To reflect these purposes, this study firstly
investigates the definition of IFSN and its role in unstable global economic
environment, and examines how IFSN has been operated and what is the
problem by analysing major financial crises: Mexican, Asian and subprime
mortgage crises. And then a variety of suggestions proposed by a number
of experts are explored for solving the problems. This section also
suggests limitations and directions of further researches.
Lastly, this project suggests a reflective statement that links section A and
B. In the reflective statement, the author identifies own strengths and
weaknesses and then finds ways to make up for the weaknesses.
Key words: Psychometric test, Learning, Financial crisis, International
Financial Safety Net (IFSN)
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ACKNOWLEDGEMENTS
First of all, I would like to appreciate my family, friends, and professors.
Especially, I would like to say thank you to Dr. Lavinia Wilson-Youlden
who gave me much formative feedback for this project. She helped me out
from subject selection for section B to how to write reflective statement.
The completion of this project could not have been achieved without the
support of her.
Secondly, I am thankful to Michael and Amy who are my flat mates. They
gave me much feedback of English structure and grammar. Thanks to the
feedback, I could improve my English writing skills and make more
“professional” project.
Lastly, I cannot express enough thanks to my classmates who were
staying together at least 10 hours in a day. Doing on professional project,
we offered words of encouragement to each other and had a break time
together. If I did not study with the classmates, I am not sure that I could
endure my life in the library.
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TABLE OF CONTENTS
TITLE PAGE...........................................................................................................1
DECLARATION AND WORD COUNT...................................................................2
ABSTRACT............................................................................................................4
ACKNOWLEDGEMENTS......................................................................................5
TABLE OF CONTENTS.........................................................................................6
LIST OF FIGURES.................................................................................................9
SECTION A..........................................................................................................10
PART 1. Who I am as a Learner?.....................................................................10
1.1 What is learning?.....................................................................................10
1.2 VARK Questionnaire...............................................................................11
1.2.1 What is VARK Questionnaire?..........................................................11
1.2.2 Implication for result of VARK ..........................................................12
1.3 Honey & Mumford Learning Styles Questionnaire..................................13
1.3.1 What is Honey & Mumford Questionnaire?.......................................13
1.3.2 Implication for result of Honey & Mumford Questionnaire.................14
1.4 Myers-Briggs Type Indicator...................................................................16
1.4.1 What is MBTI?...................................................................................16
1.4.2 Implication for result of MBTI.............................................................17
1.5 Belbin Team Role Test............................................................................18
1.5.1 What is Belbin Team Role Test?.......................................................18
1.5.2 Implication for result of Belbin Team Role Test ................................19
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PART 2. Implication for Career Chocie.............................................................21
2.1 Lifelong learning......................................................................................21
2.2 Transferable skills...................................................................................22
2.3 Justification for career choice..................................................................25
SECTION B..........................................................................................................27
PART 1. Introduction........................................................................................27
1.1 Reason for choice of topic.......................................................................27
1.2 Academic objectives................................................................................28
1.3 Outline of section B.................................................................................28
PART 2. Literature Review...............................................................................30
2.1 The concept and role of IFSN.................................................................30
2.1.1 What is IFSN?...................................................................................30
2.1.2 What is the role of IFSN?..................................................................32
2.2 Practice of IFSN and Need for reinfrocement.........................................33
2.2.1 How IFSN has worked?.....................................................................33
2.2.2 Why occurred international financial crises?.....................................34
2.3 Need for improvement of IFSN................................................................39
2.3.1 Need for improvement of IFSN..........................................................39
2.3.2 Internaional discussions....................................................................40
2.4 Suggestions for reinforcement of IFSN...................................................42
2.4.1 What need to be reinforced for "Prevention System"?......................43
2.4.2 What need to be reinforced for "Response System"?.......................44
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PART 3. Conclusion.........................................................................................47
3.1 Summery and Conclusion.......................................................................47
3.2 Limitations and Further Research...........................................................48
References for Section A...................................................................................50
References for Section B...................................................................................54
APPENDIX A........................................................................................................61
1. VARK.............................................................................................................61
2. Honey and Mumford......................................................................................64
3. Myers Briggs Type Indicator..........................................................................70
4. Belbin Team Role Test..................................................................................77
APPENDIX B........................................................................................................81
1. Curriculum Vitae............................................................................................81
2. Job adverts....................................................................................................83
3. Application form.............................................................................................87
APPENDIX C........................................................................................................91
1. PowerPoint Presentation..............................................................................91
Reflective Statement..........................................................................................93
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LIST OF FIGURES
Figure 1.1 Result of VARK Questionnaire 12
Figure 1.2 Honey and Mumford’s learning cycle 13
Figure 1.3 Result of Honey and Mumford Questionnaire 15
Figure 1.4 Four dimensions of MBTI 15
Figure 1.5 Result of Myers-Briggs Type Indicator 17
Figure 1.6 Result of Belbin Team Role Test 18
Figure 2.1 Transferable skills of Intended Career Choice 20
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Section A
PART 1 Who am I as a Leaner
1.1What is Learning?
“Learning” can be identified simply as the acquisition of skills or knowledge
through practice, experience, or study, or by being taught (Tudball, 2012).
But what does the word “learning” really mean? According to Tight (2002),
like breathing, learning is something everyone does all of time even if they
do not realise that they are doing it, which is a fundamental human
process. However, unlike breathing, there is no common understanding of
how we learn, and there are diverse opinions among psychologists and
educators about what learning is.
A variety of opinions can be toughly divided into two major views. The
more traditional theorists consider learning as outcomes or objectives. On
the contrary, the classical and contemporary contributors focus on a
process of the learning rather than results (Thomas, 1991). The difference
between those who consider learning as an outcome and those who
regard it as a process can be easily demonstrated by comparing two views
of the most prominent learning theorists, Gagné and Kolb (Tight, 2002).
Gagné (1985) identifies the elements of the learning event as consisting of
the learner, a stimulus situation, the learner’s memory and their response
to the stimulus. So, for Gagne, “Learning is a change in human disposition
or capability that persists over a period of time and is not simply attributed
to processes of growth” (Gagné, 1985, p. 2). On the other hand, Kolb
(1984) insists that learning is best conceived, not as an aspect of outcome,
as a process. That is to say, it is a continuous process grounded in
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experience, a process of creating knowledge, and it involves transactions
between the learner and the environment. In short, “Learning is the
process whereby knowledge is created through the transformation of
experience” (Kolb, 1984, p. 38)
When it comes to types of learning, learning comes to us with diverse
ways which can be roughly divided into two, formal and informal ways. For
example, we can learn the fact that fire is dangerous after we experience
hotness of fire by touching it, which is a kind of informal learning. On the
other hand, formal learning arise simply from lectures and programmes in
education institutions such as school and university.
In the fast-changing world, we have to learn new things constantly, even if
we are getting old and mature. This ‘lifelong learning’ is getting important
in today’s society (Fejes & Nicoll, 2008). In such situation, it is very crucial
to understand about own learning styles. According to Marton and Booth
(1997), one thing that people have in common is that they are all different.
Likewise, all people have different learning preferences with which
individual learners can be in better position to learn (Marton & Booth,
1997). There are four psychometric tests which help individual learners
find and understand their own learning styles. In the next part, those tests
will be introduced and examined.
1.2VARK Questionnaire
1.2.1 What is VARK?
VARK is an abbreviation of Visual, Aural, Read/Write and Kinaesthetic
which are approaches to learning. VARK questionnaire, initially developed
in 1987 by Neil Fleming, helps us identify our own learning preferences
among the four types (Fleming, 2011). It supports especially those who
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have been having difficulty in learning effectively by helping them be in
better position when getting pieces of information (Fleming, 2011).
1.2.2 Implication for result of VARK
Figure 1.1 Result of VARK Questionnaire
Visual Aural Read/Wirte Kinesthetic02468
10121416 15
6
9
4
Source: www.vark-learn.com/english/result.asp
According to the result of VARK Questionnaire (Figure 1.1), I have the
strongest preference in Visual type, which supports my opinion that I can
learn best from visual materials. There are some examples that prove the
result is correct. First of all, since I was a middle school student, whenever
I was asked what is a favourite subject, my answer is always mathematics.
Mathematics contains a lot of visual materials such as grapes and shapes
than other subjects (Clarke, Flaherty, & Yankey, 2006). My high school
teacher told that I usually understand faster such grapes of functions and
diverse geometric figures than other students, and enjoy solving them.
Moreover, a lot of friends in high school used to ask me about math
questions that they could not solve. Secondly, I have my own effective
study method that is summarising study contents in the margin of text
books by schematising and drawing diagram. The method makes me
understand easily and memorise the contents effectively. I also like to
access to written materials and read them, which is my second strong
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preference according to the result. Since I was young, my mother often
has advised me of writing notes when I heard a piece of information
because I often could not remind something I just heard once or twice due
to my bad memory. So, now I have a habit of writing notes and thereby I
am accustomed to reading written materials. Moreover, when my
concentration is down during studying, I usually write what I study literally,
which improves my concentration and memory.
On the other hand, I am not interested in kinaesthetic activities, which is
concerned with features of reflector that is considered as my learning style
in Honey and Mumford test. I usually achieve effective learning through
reflecting written and visual materials rather than directly doing something
to get to understand new knowledge. I think such my preference were
influenced by education system of my country, South Korea, which is
supported by Grace who argues that background and experiences do
affect people’s learning preference (Grace, 2001). In my country, students
usually listen to what teacher say and write them down, and study largely
with textbook and work books for examination that is a main method to
assess academic ability of students in Korea. However, through
programmes of level 6 study I got to know advantages of kinaesthetic
activities. Seminar lectures follow most of regular lectures in level 6 study.
Seminar lectures consisted of lots of team activities, and I could get a lot of
opportunities to communicate with small number of students and
professors more directly than ordinary classes. Through lots of seminars
and team activities I could get broader aspects about new business issues
than I thought alone and could improve the ability to deliver what I think
briefly and clearly.
1.3Honey& Munford Questionnaire
1.3.1 What is Honey& Mumford Questionnaire?
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Honey and Mumford’s Learning Style Questionnaire (LSQ) was introduced
in 1986 which suggests four learning styles: Activists, Reflector,
Pragmatist and Theorist (Swailes & Senior, 1999). The LSQ was
developed to report management trainees’ learning style preferences, and
designed to probe the relative strengths of the four different learning styles
(Figure 1.2). It has subsequently been applied to a wide range of subjects,
including students in higher education. (Duff & Duffy, 2002). Thus, for
those who are unaware of their own learning styles, LSQ is useful to
identify their learning preferences so that they can select better learning
experiences (Honey & Mumford, 2006).
Figure 1.2 Honey and Mumford’s learning cycle
Source: Honey and Mumford (1986, p.7).
1.3.2 Implication for result of Honey& Munford Questionnaire
Figure 1.3 Result of Honey and Mumford Questionnaire
Activist Reflector Theorist Pragmatist
9 18 14 10
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The result of LSQ (Figure 1.3) indicates that I have a very strong
preference for reflector. According to Honey and Mumford (1992),
reflectors are very thoughtful and considerate to ponder all possible
aspects before putting into action. I definitely agree with the result. The
result reminds me of what my best friends usually call me when shopping
together. When purchasing something to need, I always try to contemplate
price, quality, design and the purpose of using it, and then make a
decision. The behaviour took me a long time to buy it, so my friends called
me ‘selective disorder’ half in jest. Such behaviour is also applied to when
I have a source of trouble. To find a solution of the trouble, I usually try to
collect data thoroughly and consider all possible angles, which is typical
characteristics of reflector (Honey & Mumford, 2006).
When it comes to my second preferred learning style, theorist, Honey and
Munford (1992) state theorists like to adapt and integrate observations into
complex but logical theories. I also agree with the result. As mentioned
above, when I was a student of middle and high school, my favourite
subject was mathematics which includes not only diverse visual materials
but also lots of logical theories, compared with the other subjects. The
characteristic of mathematics that one theory can apply to various
problems attracted me in comparison with history or social science which I
just had to commit the contents to memory. The theorist learning style was
proved in university life as well. After entering the university, I took an
interest in finance with a number of well-structured equations and theories.
So I registered relevant courses such as financial investment, asset
management and financial planning, and gained high grades in Korea.
On the other hand, I got the lowest score in activists among four learning
styles, which is consistent with the result of VARK and Belbin tests in
which I got the lowest scores in Kinaesthetic and Teamwork. Honey and
Munford (1986) explain activists are open-minded and enjoy new
experiences. The characteristics of activist are contrary to theorists who
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are careful about new experiences and like thorough collection and
analysis of data before action (Mumford, 1996).
With the low preference for activists, I have a tendency to be more
nervous about presentation in front of many people than other students.
According to Kahnweiler (2009), althogh introverts are often
underestimated overachievers, they are considerate and reflective on their
tasks, and focus on depth. During level 6 study, I had a opportunity to
prensent 3 times in front of many students as a group in Global Marketing
and Communication module. Due to my intervorted personality, I collected
richer contents and prepared for presentation harder than other group
members, which consequetly enabled our group gain high mark, 8 out of
10, especially in contents part.
1.4Myers-Briggs Type Indicator
1.4.1 What is MBTI?
Have you ever imagined a test that would allow you to predict the type of
career for which you is best suited? Many people insist that such a test is
available with the Myers-Briggs Type Indicator (MBTI) (Harrington &
Loffredo, 2010). Every year millions of copies of the test are administered
in the workplace, schools, churches, community groups, management
workshops, and counselling centres (Pittenger, 1993). Many people
consider the MBTI as an invaluable tool that helps them understand their
own behaviour as well as the behaviour of others (Pittenger, 1993).
Figure 1.4 Four dimensions of MBTI
Extraversion
Action - Words
People - Things
Introversion
Thought - Ideas
Images – Information
Sensing Intuition
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Facts - Experience
Realism - Practical
Possibility - Potential
Imagination – Conjecture
Thinking
Objective - Analytical
Truth - Correctness
Feeling
Subjective - Value-driven
Morality – Likeability
Judging
Structure - Planned
Stable - Consistency
Perceiving
Go with the flow - Spontaneous
Responsive - Variety
Source: http://www.teamtechnology.co.uk/report/online/
The primary characteristic of the MBTI is that each person's personality fits
into one of 16 types. These types are based on four features of
personality, each consisting of two opposite preferences. According to the
theory, all people have an innate preference that determines how they will
behave in all situations (Harrington & Loffredo, 2010). The table above
(figure 1.4) shows the four dimensions with brief explanations.
1.4.2 Implication for result of MBTI
Figure 1.5 Result of Myers-Briggs Type Indicator
ISTJ71%
ISFJ64%
INFJ46%
INTJ53%
ISTP72%
ISFP59%
INFP50%
INTP63%
ESTP69%
ESFP63%
ENFP45%
ENTP52%
ESTJ66%
ESFJ52%
ENFJ44%
ENTJ57%
Source: http://www.teamtechnology.co.uk/report/online/
According to the result of MBTI with a pattern matching algorithm, my
closest personality type is ISTP, which means I have a practical and
logical mind-set, and thus prefer to solve problems with definite and
concrete answers than intangible ones (Myers & McCaulley, 1988). Myers
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(n.d.) explains that ISTPs enjoy doing analysable tasks, collecting clues
and facts to figure out the truth of what has happened, which is very
similar with the features of reflector, my most preferred learning style in
LSQ, who collects data thoroughly and consider all possible angles when
dealing with problems (Honey & Mumford, 2006).
I think that the result indicates my personality correctly, considering the
above-mentioned my learning experiences that before entering university,
I was interested in mathematics, and after entering university I prefer
courses related to finance and accounting which include more specific
problems and definite answers than other courses related to marketing or
organisation. The result also can be supported by my colleague’s
comment who participated in economic debate club with me. According to
Myers (n.d.), people usually tend to show their natural style in stressful
situation. My friends stated that I am painstaking person when group
activity dose not going well, which is a feature of ISTPs when being
irritated, and stated that I am good at collecting and investigating materials
needed to prepare debate and analysing them logically, but in debating I
usually failed to express what I prepared sufficiently, which is relevant with
‘I’ (Introversion) out of ISTP. Moreover, the result can be also verified by
my family who express that I usually take an objective approach when
dealing with people or problems.
1.5Belbin Team Roles Test
1.5.1 What is Belbin Team Roles test?
In today’s society, many organisations are trying to improve performance
through team activities (Batenburg & Walbeek, 2013). Moreover,
according to Belbin (2000), it is already becoming plain that people in
business and in the public services are spending more and more of their
time locked in discussions and in meetings. Given this situation, the clear
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need is to make teamwork and group activity more effective. For
evaluating this important team role, Belbin Team Role Self Perception
Inventory (BTRSPI) is the most popular and effective methods of
examining team behaviour (Batenburg & Walbeek, 2013). Furthermore,
Belbin’s approach was particularly useful in identifying strengths and
weaknesses, and which enables tasks to be allocated based on
competence and consequently improves the efficiency of work (Watkins,
1997).
1.5.2 Implication for the result of Belbin Team Role Test
Figure 1.6 Result of Belbin Team Roles Test
Least Preferred Roles Manageable Roles Preferred Roles
Plant 20 Shaper 26 Implementer 92
Resource Investigator 16 Monitor
Evaluator 41 Completer Finisher 99
Co-ordinator 14 Specialist 94
Teamwork 2
Source: http://www.belbin.com/
The result above (Figure 1.6) indicates that my preferred team roles are
Completer Finisher (CF), Implementer (IMP) and Specialist (SP). I agree
with the result definitely. First of all, Belbin (2010) explains that CFs have
an ability to finalise anything that is started and to do so with
thoroughness. In addition, CFs can sometimes be a painstaking person for
group to go smoothly and always try to find out omissions, errors, and then
deliver on time. The result can supported by my friends who participated in
economic debate club with me and commented that I am painstaking
person when group activity dose not going well and I am thorough enough
to search out errors when finalising a preparation for debates.
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On the other hand, IMPs produce large volumes of work with great
efficiency (Belbin, 2010). According to Belbin (2010), the feature of IMPs is
very along with CFs by complementing each other with macroscopic
approach of IMPs and thoroughness of CFs. So I can improve my team
ability more effectively with combination of the two team roles. Lastly,
Belbin describes that SPs are single-minded and dedicated to one
interested area, so provide knowledge and skills in rare supply. I am really
interested in one specific area, finance, so I have tried to build my
professional knowledge of finance, participating diverse economic debate
clubs and studying to achieve finance certificates, and I have some
certificates – Associated Finance Planner Korea (AFPK) and Certified
Fund Investment Advisor (CFIA). However, according to Belbin (2010),
experts are often said to know more and more about less and less. So I
have to try to develop both professionalism and other general knowledge
at the same time.
On the other hand, my weak team role is Teamworker (TW). Belbin (2010)
states that TWs have the sociability associated with extroverts but the low
dominance of the introverts, which is relevant with one feature of mine
indicated in all four tests; low preferences on Kinaesthetic and Activist in
VARK and Honey & Mumford, and Introverts feature in MBTI. Belbin
(2010) argues that the suitable positions for each person will not always be
there. Sometimes people will have to bide their time, take on another role
and sacrifice own natural behaviour. Therefore, I will try to improve my
weakness roles, teamwork, in a disciplined way, which will make me more
generally acceptable and encounter fewer enemies in the society after
graduation.
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PART 2 Implications for Career Choice
2.1Life Long Learning
In fast-moving society, the concept of lifelong learning is found
increasingly in current discussions on education and on adaption to
changes in patterns of employment (Oliver, 1999). According to Tight
(2002), lifelong learning does not mean a simple education which is
confined to childhood, adolescence and early adulthood. Instead,
‘learning’ in the notion is described as being available for everyone and as
desired and needed throughout life. However, what ‘learning’ means here
is not the day-to-day, spontaneous learning of everyday life (Knapper &
Cropley, 1991), such as when people recognise the correct amount in
payment after bus fares are increased. It is perfectly evident that such
learning is lifelong, always has been no doubt, and will continue to be,
regardless of the pronouncements of educational theorists (Oliver, 1999).
The meaning of learning in the notion is what Tough (1971) considers as
“deliberate” learning. Such learning has several definite characteristics.
Firstly, it is intentional, that is to say, learners are aware of the fact that
they are learning. Secondly, learners have definite and specific goals to
promote the self-fulfilment of each individual. Lastly thus, the learning
leads to the systematic acquisition, renewal, upgrading and completion of
knowledge, skills and attitudes (Cropley, 1980; Tough, 1971).
According to de Sanctis (1977), the main reason that has led the
increased interest in the lifelong learning is the changes that is a main
element of modern society (Knapper & Cropley, 1991), which is supported
by McClusky (1994, p. 101) who explains the connection between change
and lifelong learning, insisting that “continuous change requires
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continuous learning.” According to Leicester and Field (2000), the most
obvious area in which rapid change occurs involves the world of work.
Factors, such as emergence of new products, development of
manufacturing techniques, technological progress, and increases in
knowledge, are triggering to produce a situation in which some jobs are
simply ceasing to exist, while in others the basic skills are changing so
extensively and rapidly that it is no longer possible to acquire them
through an initial education (Knapper & Cropley, 1991), which is
advocated by Dubin (1974) who states that what is being learned today
may be irrelevant in only a few years. In such today’s society, lifelong
learning is necessary, not an option, to improve the value of the work that
we do and the worth of the lives that we live.
The work environment of finance which I consider as my future career is
no exception. Financial environment is influenced by lots of nations and
diverse industries, so it is very unstable and fast-moving (Etzion, 2009).
Moreover, for financial analysts, it is helpful to acquire knowledge of a
variety of industries to present more accurate investment and economic
prospect (Etzion, 2009). Thus, after getting a job, of course before as well,
I will keep developing professional finance knowledge by earning
professional certificates and building up knowledge of diverse areas
through education institutes or specialty publications in order to adopt
myself to continuously changing environment and outperform in my area.
2.2Transferable Skills
For students who want to enhance their employability, it is important to
study and build up advanced and specialised knowledge related to their
interested areas, but it is also crucial to develop transferable skills which
can apply across broad social contexts in fast-moving environment
(Carroll & Ryan, 2005). According to Gibbs at al. (1994), a number of
students are not being at all prepared for the world of work, whether
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commercial or public sector. Students just left higher education without
being able to communicate effectively, orally or in writing, and cooperate
with others effectively, and with being computer illiterate, lacking in
autonomy and unaware of the demands that jobs would make on them
(Carroll & Ryan, 2005).
The biggest advantage of transferable skills is that they literally can
transfer from one situation to another; from academic contexts to work
contexts and from one work context to another during increasingly
unpredictable career paths (Bridges, 1993). Moreover, Gibbs at al. (1994)
states that in fast-changing society, specific subject knowledge can be
less valuable, and the flexibility can be more effective in different
situations. What is important in these different situations is not their
knowledge content but their skills content. Therefore students should
focus on not only specialised knowledge but also these transferable skills.
Figure 2.1 Transferable Skills of Intended Career Choice
What Financial Analyst Do? Relevant Transferable Skills
Evaluate current and historical data. Information gathering
Study economic and business trends. Information gathering
Analyse data using mathematical models and statistical techniques. Organisational
Meet with company officials to gain better insight into the company’s prospects and management. Communication
Prepare reports, tables and charts that present research results. Organisational
Recommend individual investments and collections of investments, which are known as portfolios.
Problem solving
Source: Developing Students’ Transferable Skills (1994) and Bureau of Labor
Statistics (2014)
As mentioned above, my career aspiration is a financial analyst. The table
(figure 1.7) above indicates transferable skills which are concerned with a
financial analyst. According to Gibbs at al. (1994), there are 12
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transferable skills identified – Communication, Group work, Personal,
Interpersonal, Organisational, Teaching and training, Learning,
Information gathering, Problem solving, Language, Information technology
and Entrepreneurship skills. Among them, four skills are related with my
future career more directly than the other skills.
Firstly, “information gathering” skill is needed for a financial analyst to
evaluate current and historic data, and study economic and business
trends. According to the result of LSQ, I am a reflector who would like to
collect data thoroughly and consider all possible aspects and carry out
some painstaking research (Honey & Mumford, 2006). Moreover, the
result of MBTI indicates I am a person who enjoys doing analysable tasks,
collecting clues and facts. These results support that I have the
information gathering skill.
Secondly, “organisational skill” is necessary which is important when
analysing the collected data with mathematical models and statistical
techniques, and when preparing reports with lots of tables and charts. I
am also concerned with organisational skill, considering my favourite
subject, mathematics, and visual learner type in VARK, which is proper to
understand and analyse mathematical and statistical materials and
transform them into tables and charts.
Lastly, “problem solving skill”, which is needed for concluding results and
recommending fine investments, can be also proved in my psychometric
tests’ results. The features of Specialist, Complete finisher and
Implementer in Belbin test, and Reflector and Theorist in LSQ will help to
analyse relevant materials thoroughly, suggest solutions logically and put
into action without delay.
However, it seems that I do not have “communication skill”. The skill is
very important when meeting and consulting individual investors or
P a g e | 25
organisations directly, so I have to acquire the skill to be a good financial
analyst. According to Maguire and Pitceathly (2002), there are two helpful
methods to acquire communication skill: cognitive input and interactive
demonstration. So, by accessing relevant books and lectures for the
cognitive input and by simulating real situations with trainers who
demonstrate key skill in action for the interative demontstration, I will try to
gain the communication skill.
2.3Justification of Career Choice
According to Baruch (2004), concept of career choice has three basic
elements – the person, the occupation and the fit between the two. He
insists that there is a certain level of similarity or a match between
individual vocational preferences and the characteristics of the work
environment in which the person works, and the match generally has a
positive relationship with job satisfaction (Baruch, 2004). Therefore, when
choosing careers, we have to consider whether personal preferences
correspond with the environment of chosen career (Myers et al., 1998).
As indicated in the table above (Figure 1.7), financial analyst basically
must have a capability to collect relevant materials and analyse them
thoroughly and do them continuously in order to keep abreast of economic
and business trends. As mentioned above, overall results of the
psychometric tests support that I have got the basic ability of a financial
analyst, considering the features of reflector in LSQ who can conduct
critical research and produce fine analysis and reports, and the features of
ISTP in MBTI who enjoy investigative work and collecting facts and clues
(Honey & Mumford, 2006; Myers & McCaulley, 1988).
Secondly, financial analysts are required to acquire specialised knowledge
related to stock, fund and securities and so on (Bureau of Labor Statistics,
2014). I consider my theorist’s characteristic in LSQ helps understand the
P a g e | 26
knowledge logically and methodically. Moreover, according to Belbin test,
I am a Specialist who concentrates on a specialised personal interest
which is finance for me. I have developed financial knowledge, as
mentioned above, by earning financial certificates, taking relevant lectures
and participating on several financial associations in Korea and the U.K,
and really enjoyed doing them.
Lastly, financial analysts have to be punctual because only if analysed
data and trends are delivered on time, it is available and valuable to
investors (Bureau of Labor Statistics, 2014). Furthermore, in financial
environment, a little numerical error can make huge differences, so
meticulousness and accurateness must be needed (Etzion, 2009). The
result of Belbin test indicates I am a Completer Finisher who searches out
errors and omissions and delivers charged tasks on time. In addition, as a
reflector of LSQ, I would like to review what I did and catch flaws and do
on tasks very carefully. In conclusion, there is a high level of similarity
between my personality and the characteristics of the financial work
environment, which will make me satisfied with my future career, financial
analyst.
P a g e | 27
Section B“Future Direction of the International Financial Safety Net in
Unstable Global Economic Environment”
PART 1Introduction
1.1Reason for choice of topic
Nowadays the instability of global economic environment is frequently a
feature of lots of media. For example, recently as US takes an exit
strategy, India is at the verge of currency crisis experiencing high growth in
currency rate while their stocks plunge. When US's Quantitative Easing
(QE) became an established fact, India's currency crisis started and
emerging nations' financial market’s volatility expanded as a result
(Johnson, 2013).
After several financial crises since the 1980s, there have been measures
to prevent another financial crisis from happening and to resolve it at an
early stage if it does occur (Mishkin, 2010). In spite of such efforts, the
world is still exposed to the possibility of financial crisis as is evident from
the financial crisis of 1997, 2008 and the recent occasion in India.
Emerging nations and developing countries focusing on expanding foreign
exchange reserves and producing positive current accounts to be
prepared against the instability of the global currency market is worsening
the situation (Mishkin, 2010). In such a situation, the role of the
International Finance Safety Net (IFSN) which relieves the world's financial
instability is getting crucial. However, the current IFSN include lots of
problems.
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The world has been rapidly globalised since 1990 and financial crisis has
been occurring frequently around major emerging economies
(Eichengreen, 2002). With the globalisation and integration of the world's
financial market, it is evident that one country's financial crisis will have a
ripple effect on others. Thus, the need for the improved international or
global financial safety net (IFSN or GFSN) is growing (Fernández‐Arias &
Levy‐Yeyati, 2012).
1.2Academic objectives
The academic aim of this study is to examine the importance of the IFSN
in unstable global economic environment and the need for the
reinforcement of IFSN. To reflect this point, the academic objectives of this
study are:
(1) To gain the deeper understanding of IFSN and global economic
environment;
(2) To examine international financial crises and importance of role of
IFSN;
(3) To explore the need for reinforcement of IFSN;
(4) To investigate suggestions for improvement of IFSN proposed by
experts
1.3Outline of Section B
Section B consists of three parts as follows:
PART 1: Introduction – This part introduces proper background reasons,
motives of the chosen issue and provides the aims and objectives of the
study.
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PART 2: Literature review – This part as the main body of this study will
examine a definition of IFSN, practices of IFSN and future direction of
IFSN in unstable global economic environment suggested by lots of
experts.
PART 3: Conclusion – In this part, all the analyses and evidences are
summarised and an overall conclusion is provided with limitations and
further research.
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PART 2Literature Review
2.1 The concept and role of IFSN
2.1.1 What is IFSN?
Experiencing international financial crises in 1997 and 2008, emerging
nations and developing countries concentrate on expanding foreign
exchange reserves and producing positive current accounts to be
prepared against the instability of the global currency market, and the
situations is worsening (Mishkin, 2010). In such economic situation, the
IFSN that can stabilise financial crises gets important, for which the first
step is to define the concept of IFSN and its role. However, there is no
single, universally accepted definition of IFSN. So, first of all this study
identifies the concept of “financial safety”, and then defines the concept of
IFSN.
The concept of “financial safety” or financial stability has been recognised
as one of the important political objectives stated on duties of central
banks in major nations (Demirgüç-Kunt & Huizinga, 1999). Reflecting the
practices around world, financial safety is mainly explained as a contrary
concept of “financial instability”. Borio and Drehmann (2009) distinguish
financial instability from financial distress (or a financial crisis), and identify
“financial distress” as an event in which substantial losses at financial
institutions or their failure threaten to cause serious dislocations to the real
economy. On the other hand, they define “financial instability” as a
situation in which normal-sized shocks to the financial system are
sufficient to produce financial distress. Financial stability is then the
converse of financial instability.Besides, IMF (2011) defines the financial
safety indirectly, identfying macroprudential policy as a method to maintain
P a g e | 31
“financial safety” by controlling system risk or overall financial risk.
Likewise, theories on financial safety have been developed with the way
identifying financial instability and extreme situaiton, financial crisis.
Based on the concept of financial safety, International Financial Safety Net
(IFSN) can be identified as a tool which maintains international financial
market stably by preventing transmission of financial crisis from a
brithplace to another (Demirgüç-Kunt & Huizinga, 1999). With the
globalisation and intergration of the world’s financial market,
interdependence among nations is intesified, which increases the
possibility of crises caused by external shocks (Mishkin, 2010). Thus, the
communal problem solving efforts across the world is necceesary, and one
of the efforts can be the International Financial Safety Net. According to
Fernández‐Arias and Levy‐Yeyati (2012), without the IFSN, it is easy for
economy of each nation to be exposed to system risk, and due to
contagion effect the system risk would spread out rapidly, and which
consequently would lead to global fiancial crisis. Therefore, IFSN means a
safeguard to keep international finance system stable by controlling
contagion effect of financial crisis.
So, what is the elements of IFSN? The IFSN consists of national financial
safety nets which promote a stable national finance environment, internally
through shared duties between government, supervisory institutions and
central bank according to division of labour, and externally through
international financial organisations such as intergovermental panel,
consultative group of supervisory institutions and central banks (Jung,
2013). However, the external part has not worked effectively due to
interests of each nation. In such situation, the most important element of
IFSN would be “international financial cooperation”, which means a series
of cooperative activities such as exchange of information between
governments and central banks, and joint decision-making and execution
in the process of establishing governance of the international financial
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system (Schich, 2009; Jung, 2013). Altough in the past, global financial
order was adjusted by the leading role of countries with economic
dominance, hegemony, after experiencing several financial crises,
contemporaries recognise that international cooperation is necessary for
the successful functioning of a financial system (Eichengreen, 1989). For
instance, G20 Finance Ministers' Meeting was held for Asian financial
crisis, and Financial Stability Forum (FSF) was established by gorveners
of each nation’s financial supervisory authority and central bank for the
stable international financial system, and besides there are some more
international cooperation such as IMF which is for reinforcing financial
system of emerging nations, and Financial Sector Assessment Program
(FSAP) operated by World Bank (Borio & Drehmann, 2009). However, it is
still not enough to prevent and manage financial crisis effectively
(Fernández‐Arias & Levy‐Yeyati, 2012).
Another element of IFSN is the prevention system for anlaysing and
supervising financial market and economic condition, and the response
system for helping overcome crisis quickly with appropreate funding (Jung,
2013). The prevention system includes the financial supervision system of
international financial institutions such as IMF, Bank for International
Settlenments (BIS) and Financial Stability Board (FSB), and the response
system employs emergency funding system such as Flexible Credit Line
(PCL) operated by IMF (Borio & Drehmann, 2009). In conclusion, IFSN
consists of the “prevention system” and “response system” based on
“international financial cooperation”.
2.1.2 What is the role of IFSN?
The essential role of IFSN is to stabilise international financial crisis, which
means to keep global financial environment stable by preventing financial
crisis and stopping one country’s crisis from spreading to another country
(Zeller, 2001). According to Fernández‐Arias and Levy‐Yeyati (2012), in
P a g e | 33
modern society, more and more innovative financial means and
techniques are introduced while globalisation and securitisation of financial
instruments complicates financial crisis even further through coupling
effect. In this condition, the IFSN prevents an increase in financial
imbalance which potentially can cause financial crisis, and prevents one
sector’s risk from being transmitted to other (Jung, 2013). Moreover, if the
global financial instability spreads enough to pose danger to other
country’s financial system, it actively injects funds to relieve the situation
(Jung, 2013).
2.2 Practice of IFSN
2.2.1 How IFSN has worked?
In the past, financial crises usually occurred in the emerging or developing
nations which had less advanced financial systems. However, recent
financial crises derived from developed countries as well and spread out to
the world (Borio & Drehmann, 2009). Moreover, while errors or immature
of exchange policy of birthplace were blamed for the causes of financial
crises in the past, recent financial crises are due to the overall vulnerability
of the international financial system rather than the fault of one country
(Borio & Drehmann, 2009). According to Saapar and Soussa (2000), the
combination of the international financial system’s vulnerability and the
financial globalisation has encouraged financial crises’ spread with the
contagion effect caused by intensified interdependence among nations.
Thus, the role of the IFSN is significantly important. However, the current
IFSN operated by international financial institutes such as IMF, BIS and
FSB includes lots of problems such as inconsistent regulations,
supervision structure and provision of short-term, insufficient incentives
(Kane, 2010). Furthermore, Fernández-Arias (2010) states that with the
current IFSN, it is difficult to perceive and manage international financial
risks at an early stage, and there is a lack of information sharing among
P a g e | 34
international financial institutions. Therefore, we now investigate how the
IFSN has worked, what is the problems and what factors need to be
improved and reinforced, by researching major financial crises: Mexican,
Asian, and American subprime mortgage crises.
2.2.2 Why occurred international financial crises?
There are a variety of opinions as to what is the cause of international
financial crises. Eichengreen (2002) explains after the 1990s the main
cause of crises have been “contagion effect” which means transmission of
crises from one nation to another. On the other hand, Timmermans (2001)
suggests that with the traditional approach, recent crises in the emerging
markets were the result of a foreign currency liquidity problem or economic
cycle. Mishkin (2010) explains with asymmetric information models, the
cause of financial crises is because adverse selection and moral hazard
make financial intermediation vulnerable. In addition, Mishkin (2010)
explains emerging nations’ financial crises with the approach of
international liquidity factors such as sudden stop or reversal.
According to IMF (2011), those main causes are divided into the triggering
factor and the vulnerability factor. Firstly the triggering factor is a
phenomenon of reflecting financial instability such as rising interest rates,
the bankruptcy of large firms, rapid decline in the value of currencies and
sudden stop. On the other hand, the financial structure’s vulnerability of
financial and non-financial institutions is included to the vulnerability factor
which determines whether the triggering factors are extended to a financial
crisis (IMF, 2011). Considering these factors, the role of IFSN is to
supervise the triggering factors and to enhance the vulnerability, and
thereby prevent financial crisis (Jung, 2013). However, current IFSN with
lots of problems has not worked effectively, and the following financial
crises has occurred and spread out.
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Firstly, in terms of Mexican financial crisis in 1994, the crisis left a lot of
lessons to other emerging nations. Internally, first of all, chronic cumulative
deficit of current account aggravates foreign debt and consequently
destroys the national economy (Espinosa & Russell, 1996; Billings &
Pazarbasioglu, 1996). Secondly, excessive dependence on foreign capital
triggers the financial crisis (Espinosa & Russell, 1996; Carrasco &
Thomas, 1996). Thirdly, political and social unrest disturbs for national
economy to be stable (Billings & Pazarbasioglu, 1996). Lastly, the
government's economic policy mistakes and incompetence, like insufficient
devaluation of the Peso, drive the national economy into catastrophe
(Carrasco & Thomas, 1996). Externally, with the lack of prevention
function and insufficient role as a lender of last resort, IMF who is one of
the operators of IFSN could not respond appropriately to the financial
crisis (Eichengreen, 2002; Billings & Pazarbasioglu, 1996).
After Mexican financial crisis, the vulnerability of the international financial
system was recognised, and so the G7 summit meeting was hold in
Halifax, Canada in June, 1995 and the main discussions included the
reinforcement of supervision ability of IMF, the improvement of the
emerging nations’ banking system and New Agreement TO Borrow (NAB)
for enhancing emergency funding function of IMF (Springer & Molina,
1995). In addition, they have announced the promotion of international
cooperation between supervisory authorities and the appropriate
supervision on international financial institutions (Gil-Diaz, 1997).
According to this result of the G7 summit meeting, BIS and International
Organization of Securities Commissions (IOSCO) organised “Coordination
Group” for the active information exchange between banks and securities
regulatory authorities (Bayne, 1995). However, such efforts have not
realised and implemented effectively, and financial environment was still
exposed to the possibility of financial crisis (Goldstein, 1998).
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Turning to Asian financial crisis, Asian financial crisis occurred in Thailand
in 1997 and spread rapidly across Asia, and the crisis gave a big impact to
the international financial system. Even if each Asian country had the
different economic situation, commonly they had grown rapidly, 5~10 per
cent, and generally maintained the financial soundness, and the prices
were relatively stable (Corsetti, Pesenti, & Roubini, 1999). This was
different from Mexican situation caused mainly by financial insolvency.
So, why the Asian financial crisis occurred? Goldstein (1998) states that
most of Asian nations needed to raise foreign capital continuously for high
economic growth, for which they operated Multicurrency Basket System
that fixes their currencies to the U.S. dollar, since they needed to keep
value of their home currencies stable at the same time. Moreover, with
capital market opening, Asian financial institutes borrowed short-term
funds from abroad at relatively low interest rates and then operated the
funds in the domestic market at higher interest rates (Miller, 1998).
Consequently, they were exposed to the maturity mismatch and currency
mismatch (Miller, 1998). At that time, Asian financial authorities did not
have an ability of risk management and supervisory to the extent that
copes with sudden changes, adjusting large-scale foreign borrowing
appropriately, and besides, most of all they had a vulnerable financial
infrastructure (Corsetti, Pesenti, & Roubini, 1999).
With the background, the causes of Asian financial crisis are firstly a
serious imbalance of the current account. The increasing short-term
foreign loans for making up for the current account deficit faced the
transient pressure of payback, which caused the insolvency and, thereby,
the Asian financial crisis occurred. In the same vein, Johnson (2000)
states that the capital market opening and the liberalisation of foreign
currency and capital led to increase international capital mobility, which
resulted in exposure to the risk of short-term capital outflows. Another
cause is the vulnerability of Asian financial system. Miller (1998) insists
P a g e | 37
that most of Asian nations at that time had the poor financial infrastructure
and inability of risk management and supervisory. On the other hand,
Goldstein (1998) claims that the Asian financial crisis was because
exchange rate policy without consideration of their economic fundamentals
triggered exhaustion of foreign exchange reserves. For example, in case
of Thailand, even though they aggressively intervened in the foreign
exchange markets and raised interest rates in order to make its currency
stable, they eventually faced the international speculative capital’s attack
on the baht and the continuous foreign outflow, which spread rapidly to
neighbouring countries and led to the Asian financial crisis in 1997
(Goldstein, 1998).
After the Asian financial crisis, the problems of the international financial
system which could not sense pre-crisis and failed to prevent spread of the
crisis came to the front. When the Asian financial crisis occurred, the
international financial system as a basis for IMF could not control rapid
expansion of international capital flows, so improvement of the
international financial system was claimed (Mitton, 2002). The Asian
financial crisis left implications to the international community such as the
importance of stable macroeconomic policy, sound management of the
current account and the need for reinforcement of capacity of the financial
supervision authorities and so on (Goldstein, 1998). Among lots of
implications, international cooperation was also mentioned for monitoring
of international capital flows and for preventing contagion effect (Mitton,
2002).
The last case is American subprime mortgage crisis. With the bankruptcy
of the Bear Stearns in 2007 and Lehman Brothers in 2008, US financial
crisis spread around the world, and most of countries have been
influenced from the crisis. Besides, the impact is still to be continued
(Fernández‐Arias & Levy‐Yeyati, 2012). The recently occurred Indian
financial crisis has also been influenced from the US exit strategy for the
P a g e | 38
Quantitative Easing which was one of solutions for sub-prime mortgage
crisis (Johnson, 2013). According to Donnelly and Embrechts (2010), the
impacts of the financial crisis on the world economy employ the negative
economic forecast, fluctuation of exchange rates, stock prices and
economic recession and so on. Especially, the sub-prime mortgage crisis
generated a vicious circle among the real market and the financial market,
so the spread of the impact has been out of control (Jaffee, 2009).
The causes of the American financial crisis include long-term easy-money
policy, excessive lending of financial institutions, property price surge and
rapid transition to fiscal austerity, financial deregulation, insufficient
supervision, the surge in household debt, and global imbalances
(Davidson, 2008; Demyanyk & Van Hemert, 2011). The vicious cycle has
started from the above-mentioned causes. The causes triggered real
estate recession increasing household debt, which led to the reduced
demand of real estate and downturn of the real estate market. In turn,
subprime mortgage with high risk became non-performing loans, which
aggravated loss of financial institutes. More and more pledged real estate
assets as collateral have been put on the market, and accordingly the
value decreased and the financial institutes failed to cope with it, which let
overall finance vulnerable (Davidson, 2008). Consequently, the reduced
liquidity of funds caused contraction of real market and reduced
investment, and which led to reduce production and employment and
increase household debt again (Demyanyk & Van Hemert, 2011). The
vicious cycle eventually triggered the financial crisis that spread out over
the world with financial globalisation, threating the stability of the
international financial system (Davidson, 2008).
Many experts insist that the riffle effect of American financial crisis on the
world economy is the most powerful after The Great Depression in 1930
(Jaffee, 2009). According to Hellwig (2009), considering that the crisis
especially derived from financial sector and was caused by negligent
P a g e | 39
supervision, poor evaluation systems and moral hazard of financial
professionals, global financial order is expected to be changed and
reformed considerably in order to prevent recurrence of the global financial
crisis. Moreover, recent India's situation shows that this crisis has not
ended yet. The U.S enforced Quantitative Easing for responding economic
impact of subprime crisis and the funding became the external funding of
emerging nations which are sensitive to external stimulus, expanding the
volatility of flow of funds (Donnelly & Embrechts, 2010). Accordingly
emerging nations’ financial situation was rapidly deteriorating by exit
strategy of the U.S (Donnelly & Embrechts, 2010). Likewise, the
international financial environment is still mainly influenced by the strong
US economy. Thus, international efforts are required to solve this global
imbalance which potentially can cause financial crisis again.
After researching the major financial crises, it is evident for IFSN (or
International financial system which operates the IFSN) to need to be
reinforced. Thus, in next part, this study will cover about it in detail and
with diverse approaches.
2.3Need for improvement of IFSN
2.3.1 Need for improvement of IFSN
In terms of emerging nations, they enter upon a new phase of macro-
economic management because economic and financial globalisation has
expanded capital flows between countries since the 1990s. Large capital
flows has constrained emerging nations from implementing diverse
monetary policy and expanded exchange rate volatility (Suttle, Koepke, &
Mazzacurati, 2010). Some emerging nations already have experienced
financial crisis due to such external impacts and the vulnerability of
domestic financial structure. So, most of emerging nations have expanded
foreign exchange reserves in order to minimise the side effects of rapid
P a g e | 40
capital flows and enhanced ability to cope with crisis (Fischer, 1998). In
addition, some emerging nations have enforced regulations on capital
flows, directly or indirectly, and strengthened prudential supervision
(Johnson et al., 2000).
In spite of such efforts, the emerging nations are still exposed to the
possibility of financial crisis. Subbarao (2009) states that the emerging
nations have suffered from unstable economy due to sudden stop of
capital inflows and the subsequent large-scale capital outflows caused by
the US economy. That is to say, although global capital flew into Asian
emerging nations due to the U.S. quantitative easing, recently the U.S exit
strategy promotes financial instability regardless of sufficient foreign
exchange reserves like India (Johnson, 2013).
Schich (2009) claims that the financial instability is partly because the
current IFSN has not worked enough to manage global financial
environment stably. The current IFSN’ problem is that international
financial institutions’ governance and operational constraints disturbs to
perform their original purpose and role effectively (Schich, 2009). So,
financial supervision and crisis prevention of the institutions are too late to
prevent financial crisis (Zeller, 2001). Besides, according to Schich (2009),
in terms of response for a crisis, insufficient capital makes lender of last
resort not work effectively. Therefore, many experts argue that
international society needs for the IFSN (or International financial system)
to be reinforced in supervision and crisis prevention functions and crisis
response capability (Schich, 2009; Szyszka, 2010; Kane, 2010;
Fernández‐Arias & Levy‐Yeyati, 2012; Cordella & Eduardo, 2010; Mishkin,
2010).
2.3.2 International Discussions
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International Conferences also recognise the need of reorganisation of the
international financial system. Since international society has blamed the
instability of the international financial system, active discussions on the
reorganisation of the international financial system is underway (Kane,
2010). Mayes (2005) explains that the discussions began in earnest after
the Asian financial crisis because the paradigm of the financial sector
changed from market efficiency to market stabilisation. After the Asian
financial crisis, G7 hold summit conferences in Birmingham, the UK in May
1998, in Cologne, Germany in June 1999 and in Fukuoka, Japan in July
2000 (G20, n.d.). Especially the summit meeting in Cologne, Germany
adopted “the Report for Strengthening the International Financial
Architecture” which included firstly, reform of the international financial
institutions, secondly, transparency of financial information, thirdly,
strengthening financial regulation in developed countries, fourthly,
strengthening financial systems in emerging countries, fifthly, expansion of
private sector participation, and lastly, the reorganisation of exchange rate
system (Kirton, 2005), which encompassed main opinions of the other
summit meetings.
The direction of discussions after American financial crisis is similar with
the one after Asian financial crisis. G20 summit in 2009 adopted “5
Principles and Action Plan for Financial Market Reform” which contains
strengthening transparency and accountability, improvement of financial
regulation and supervision, improvement of credibility of the financial
market, international cooperation intensification, and reform of the
international financial institutions (Bradford & Linn, 2010).
Furthermore, in Finance Ministers and Central Bank Governors Meeting,
G20 states that changes in monetary policy of developed countries such
as the US exit strategy should be carefully calibrated and clearly
communicated with the market (Bradford & Linn, 2010). They also insist
that the emerging nations need strong macro-prudential system, and
P a g e | 42
reinforcement of Regional Financial Agreements (RFA) is required as
crisis management system to respond to increasing volatility of
international financial markets. For the first step for them, G20 emphasised
the importance of communication channel between IMF and RFA, and
between RFAs (Bradford & Linn, 2010).
In conclusion, the international discussions on reorganisation of the
international financial system indicate that for improvement of stability of
global financial environment, the most important is international
cooperation based on transparency of financial information and
communication between financial institutes and between nations.
2.4Suggestions for reinforcement of IFSN
As mentioned above, the main role of IFSN is to stabilise international
financial crisis, which means to keep international financial system stable
by blocking financial crisis’s transmission caused by contagion effect with
financial globalisation and integration (Zeller, 2001). In the current
international financial system, such role is conducted mainly by IMF.
However, the current international financial system has inconsistent
regulations and supervision structure due to the lack of integrity, and
provides insufficient incentive to the financial market (Kane, 2010). In
addition, the current international financial system has difficulty in
exchanging information between financial institutes and in sensing and
managing financial crises at an early stage (Tompson, 2004). Thus, many
experts insist that IFSN needs to be reinforced for stability of the global
economic environment (Ostry & Zettelmeyer, 2005; Fernández‐Arias &
Levy‐Yeyati, 2012; Kane, 2010; Jung, 2013).
The IFSN can be divided into prevention system and response system
(Jung, 2013). According to lots of experts, for solving the existing problems
the prevention system is required to reinforce a monitoring function and a
P a g e | 43
proactive funding system. On the other hand, the response system is
needed to reinforce roles as international lender of last resort and as a
crisis manager (Hwang, 2010; Jung, 2013; Fernández‐Arias & Levy‐
Yeyati, 2012; Fernández-Arias, 2010; Demirgü-̇Kunt, Evanoff, & Kaufman,
2011; Cordella & Eduardo, 2010).
2.4.1 What need to be reinforced for the “Prevention System”?
In terms of the prevention system, first of all, “monitoring function” on the
global financial crisis is required to be improved. In this regard, IMF and
FSB are under discussion for developing detailed plans to cope with the
problem. However, the exchange of financial information between
institutes is currently not active (Jung, 2013). According to Fernández‐Arias and Levy‐Yeyati (2012), for monitoring the global financial crisis the
most important condition is the activation of cross-border exchange of
financial information, which is supported by Sussangkarn (2010) who
claims that the relevant financial information should be allowed in order to
detect pre-crisis, and the sufficient financial information enables to monitor
financial crisis more effectively. In this context, Cordella and Eduardo
(2010) contends that new information consultative group between
international financial organisations such as IMF, FSB and BIS should be
established, and based on this the international organisations can improve
monitoring function. According to Fernández‐Arias and Levy‐Yeyati
(2012), for the active exchange of financial information, the unified
international supervision standards and reporting forms are necessary.
Currently, International Financial Reporting Standards issued by the
International Accounting Standards Committee is one of the good
examples. However, more unified international standards are claimed
(Jung, 2013).
Secondly, “proactive funding system” is needed in order to resolve a risk
quickly when sensing the possibility of financial crisis (Demirgü-̇Kunt,
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Evanoff, & Kaufman, 2011). Currently IMF is trying to support fund quickly
with Flexible Credit Line (FCL) before financial crisis occurs (Ostry &
Zettelmeyer, 2005). However, According to Ostry and Zettelmeyer (2005),
the effectiveness is not significant due to Reputation Risk which means if a
country requests for IMF to supply fund, financial market would recognise
the country is exposed to financial crisis even though it is not bailout loan.
G20’s discussion on new short-term liquidity support schemes indicates
that other financial organisation, not IMF, should supply the proactive
funding for avoiding the Reputation Risk (Ministry of Strategy and Finance,
2011). In this context, Ostry and Zettelmeyer (2005) insist that mutual fund
using Sovereign Wealth Fund (SWF) supply fund before crisis occurs.
According to SWF institute (n.d.), SWF means a government investment
vehicle which is funded by foreign exchange assets, and they manage
those assets separately from the official reserves of the monetary
authorities. With using SWF which 39 countries currently operate, the size
of government’ fiscal deficit can be reduced, and international financial
market can be stabilised by adjusting to global liquidity to some extent
(Ostry & Zettelmeyer, 2005). Most of all, each country can use it without
worrying about the Reputation Risk because it just takes advantage of the
existing SWF without additional investment funds (Ostry & Zettelmeyer,
2005).
2.4.2 What need to be reinforced for the “Response System”?
When financial crisis occurs, it is very important to stabilise it as soon as
possible for preventing spread to other nations (Eichengreen, 2002).
Mishkin (2010) claims the main financial crises after the 1990s spread out
over the world because of insufficient IMF’s role as a lender of last resort.
Therefore, the “lender of last resort role” is required to be reinforced for
responding actively after financial crisis occurs. The above-mentioned
discussions on the reorganisation of international financial system also
recognised the problem, and insists increasing quota for funding
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expansion, improved statistics and policy transparency, and improved
funding system (Fernández-Arias, 2010). For reinforcing the role of IMF as
lender of last resort, many studies also assert to expand fund through
increasing quota of IMF (IMF, 2010; Cordella & Eduardo, 2010; Jung,
2013; Fernández-Arias, 2010). In addition, Sussangkarn (2010) claims that
intensified cooperation is also needed for improving the problem between
IMF and local monetary institutes such as Chiang Mai Initiative (CMI),
Asean+3 Macroeconomic Research Office (AMRO), Arab Monetary Fund
(AMF), Latin American Reserve Fund (LARF), and European Central Bank
(ECB).
Secondly, the response system needs “financial assurance system” which
means that public guarantees absorb the credit risk of the market in which
financial crisis occurs, which creates credit through economies of scale by
risk pooling, and helps extend debt maturity (Hwang, 2010). Especially the
financial assurance system is more effective to the financial crises
triggered by failure of extension for short-term debt’s maturity by supplying
liquidity through public guarantees (Hwang, 2010). According to Mishkin
(2010), the failure of extension of the maturity of short-term debt has been
the main reason of financial crises. Thus, if the financial assurance system
is reinforced, many financial crises in the future would be soon relieved.
Lastly, an “new international system dealing with failing financial
institutions” needs to be developed. Fernández‐Arias and Levy‐Yeyati
(2012) argue in case of financial crisis the new international system would
be able to bath process and work faster than the scattered large
institutions around the world such as Highly Leveraged Institutions (HLIs).
In addition, the new international system would be able to stabilise crises
quickly by determining solutions unilaterally in case that creditor nation
and debtor nation fail to arrange with the problem and delay solving the
crisis. According to Demyanyk and Van Hemert (2011), dealing with failing
financial institutions is relevant with debt restructuring or debt relief.
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‘Sovereign Debt Restructuring Mechanism’ suggested by Anne Krueger,
former IMF senior vice president, is good example (Fernández‐Arias &
Levy‐Yeyati, 2012). The mechanism is that if an absolute majority of all
creditors of the national debt decides to a debt restructuring, all creditors
are forced to comply with it (Demirgü-̇Kunt, Evanoff, & Kaufman, 2011).
The reason why this compulsory rule is needed is that for a country, it is
impossible to bankrupt or go into liquidation, and it is difficult to adjust to
the bankruptcy procedure of corporation that creditors shrink the existing
shares of owners through capital reduction, or directly acquire the
company through debt-equity swap (Fernández‐Arias & Levy‐Yeyati,
2012). However, such method for coping with the national debt
restructuring is not enough currently, and which is also one of the reasons
the new international system dealing with failing financial institutions is
needed to establish (Fernández‐Arias & Levy‐Yeyati, 2012).
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PART 3Conclusion
3.1 Summary and Conclusion
The main objective of this study is to examine what is International
Financial Safety Net (IFSN) and how IFSN has worked and what need to
be improved. So, this project firstly investigated the definition of IFSN and
its role in unstable global economic environment. After investigating them,
the most important role of IFSN is to stabilise financial crisis quickly. That
is to say, with sensing pre-crisis before financial crisis and rapid response
after it, IFSN prevents the crisis from having a ripple effect on other
countries and consequently maintains international financial system stably.
However, recently contagion effect gets intensified with innovative financial
instruments and technology, and the globalisation and integration of the
world's financial market. In such situation, IFSN’s role is more crucial
(Fernández‐Arias & Levy‐Yeyati, 2012).
Secondly, this study examines how IFSN has been operated and what is
the problem by analysing major financial crises: Mexican, Asian and
subprime mortgage crises. In current international financial system, IFSN
is operated by IMF, BIS and FSB. However, the current international
financial system has inconsistent regulations and supervision structure
and provides short-term and insufficient incentives to financial market
(Kane, 2010). Moreover, there is a lack of management of financial crisis
at international level and exchange of financial information between
financial institutes (Kane, 2010). In addition, the subprime mortgage in
2008 show the international society how the world economy could be
worse without properly working IFSN which prevent financial crisis in
advance and help overcome it quickly (Jung, 2013).
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Lastly, a variety of suggestions proposed by experts are explored for
solving the problems. IFSN is divided into the prevention system and the
response system. For the prevention system, monitoring function and
proactive funding system need to be improved (Fernández‐Arias & Levy‐
Yeyati, 2012; Cordella & Eduardo, 2010; Ostry & Zettelmeyer, 2005;
Demirgü-̇Kunt, Evanoff, & Kaufman, 2011). For the response system,
international lender of last resort, international financial assurance system
and international system dealing with failing financial institutions are
required to be reinforced and developed (Fernández‐Arias & Levy‐Yeyati,
2012; Jung, 2013; Hwang, 2010; Sussangkarn, 2010; Cordella & Eduardo,
2010). However, the most important is the intensified international
cooperation between financial institutes and between nations. The above-
mentioned suggestions cannot be implemented without the international
cooperation. Moreover, even if in the past the country with strong economy
power adjusted the international financial order, in current unstable
financial situation, cooperation among nations must be needed
(Eichengreen, 2002).
3.2 Limitations and Further Research
In fact, the IFSN is an abstract concept a bit, which is invisible but
operated by international financial system. In addition, there is no
internationally agreed point on the definition. So, it was difficult to define
the clear concept of the IFSN. Moreover, due to a word limit, this study
could not covered specific contents of international conferences and a
diversity of the financial crisis’s cases but only major crises like the
subprime mortgage crisis. So, it is needed to analyse the specific contents
of international conferences and other financial crises like Indian one in
order to gain more deep and current understanding about international
financial environment. Besides, financial crises have occurred
continuously and constantly for a very long time. And every time the crisis
occurred there have been the reforms of financial system and the new
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regulations. However, our financial society is still exposed to the possibility
of financial crisis, since the financial environment is too fluctuating and
fast-moving to predict exactly (Mishkin, 2010). So, solutions suggested in
this study would not be the final point to stabilise international economic
environment. Therefore, continuously updated analyses and suggestions
should be following, corresponding to the rapidly changing environment,
for stability of international financial environment.
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APPENDIX A
1. VARK
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2. Honey & Mumford Learning Styles Questionnaire
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3. Belbin Team Role Test
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APPENDIX B
Financial Analyst- Leicestershire , East Midlands
- £25000 - £35000 per annum
Reporting to the regional Finance Manager, the Financial Analyst will be responsible for preparation and legal entity closing, analysis and reporting of Financial Results ensuring accuracy and timeliness of information be maintained to enable effective managerial use. The Financial Analyst is expected to work closely with local Site Administration, Site Managers and General Managers, as well as with internal and external Finance groups
JOB DUTIES: * Month end US-GAAP close activities for selected legal entities including accurate and timely production of monthly financial accounts, balance sheet and intercompany reconciliations* Preparation of client invoices and cost plus invoices* Liaison with local administration staff on cash forecasts requirements* Preparation and filing of local GAAP and/support of outside accounting services* Provide data and reporting to auditors and local authorities (i.e. income tax, VAT declaration)* Coordinate purchase orders, capital expenditure and lease/buy studies* Performance of reports and analyses of monthly business results and support operational managers* Preparation of the forecasts and annual business plan* Supports commercial with business proposals and creates business cases with return on invested capital and EBITDA calculations
The role of the Financial Analyst requires a degree, preferably in accounting. Minimum of three years relevant accounting experience. Must demonstrate initiative, leadership, good judgement and the ability to effectively communicate. The person must be able to work on own initiative with minimum supervision, be resourceful and have the ability to use sound judgement is essential.
Our client is a global, integrated services provider for the management of warehouses, operations, inventory, and transportation, with approximately 5,000 employees. The Company provides services to the industrial, automotive, mining, oil and gas, consumer durables, aerospace and defence, high tech and electronics sectors.
Apply below or to find out more about the Financial Analyst job contact Jessica Murphy on [email protected] or call +44121260 2545 quoting the reference 1927160.
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Group Financial AnalystLocation: Dartford, KentSalary: £30000 to £45000 per annumCompany: Michael Page FinanceJob type: PermanentDate posted: 28/11/2013 23:37Job reference: Totaljobs/MPTJ13331223Contact: Paul Urquhart
This is a very broad and interesting role which will give you exposure to all levels of the business. As Group Financial Analyst, you will effectively operate as a commercially focussed Group Finance Manager, providing high level support to the Group CFO, CEO and CMO, and will assume the following responsibilities:
- Consolidate Management Reports from around the Group- Provide high level analysis and commentary on variances in results- Support International Finance colleagues in order to drive results - Highlighting and resolving issues that may arise around the organisation- Undertake the year end consolidation process under IFRS- Taking responsibility for Group P&L, cash flow and balance sheet, including financial reporting
The Group Financial Analyst will possess a broad skill set, including at least a theoretical knowledge of group consolidations. The successful candidate will have a strong analytical background, be highly analytical, and driven to succeed, and have a pro-active approach.
Knowledge of IFRS and international GAAPs would be of definite benefit as this role will be consolidating the results from International entities, and helping to drive improved performance on a global scale.
As the company has a German base which you will be required to liaise with regularly, the Company are seeking to recruit a candidate who has fluent German language skills.
The right experience to be a Group Financial Analyst may have been gained inThe Dynasafe Group is an international organisation and a world leader in its field, designing and manufacturing equipment for the removal, management and destruction of Unexploded Ordnance devices including Chemical, Biological, Radiological explosives and other hazardous
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materials. Working with the UN, Government Departments and multinational companies Dynasafe has over twenty years of experience operating in regions affected by land and marine mines, unexploded bombs or terrorist activity.
The Group has been recently been formed by a series of acquisitions and is in the early stages of establishing the corporate function and this role reports to the Group CFO who is based in Dartford, Kent. The private equity owner is keen to grow the business and this role will play a key roleBasic salary of £30-45,000 depending on experience + benefits
Your application will be reviewed by Michael Page. Please be aware we receive a high volume of applications for every role advertised & regularly receive applications from candidates who exceed the job credentials. We will only contact you within the next 14 days if you are selected for interview.
Where specific UK qualifications are required we will take into account overseas equivalents.
Michael Page is a world leading recruitment consultancy.
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1. A standard application form
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APPENDIX C
1. PowerPoint Presentation
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Reflective Statement
I learned lots of things through this experience. In the section A, I could
identify my preferred learning styles and personality by taking four
psychometric tests. Furthermore, I could find my strengths and
weaknesses through implications of the results, and then I reflected the
implications to my future career as a financial analyst. Through these
activities, I could realise that my future career corresponds with my
characteristics and personality. In addition, I got to understand about
lifelong learning and transferable skills. While doing the literature review of
lifelong learning, I realised that lifelong learning is essential for me to live
in rapidly changing world. I thought that learning is just for getting a job,
and I will only focus on sociable activities instead of learning after job
placement. However, the literatures of lifelong taught me my thought is
totally wrong. Besides, I could understand the importance of transferable
skills. Actually, I had never heard about transferable skills in my country,
Korea, because we tend to only focus on particular job skills such as
certificates. Fortunately, this was a good chance for me to consider about
my transferable skills, and how to develop them in the future, and made
me realise that I need to develop both particular job skills and transferable
skills to outperform in my area as a financial analyst.
I found some strengths and weaknesses through section A. According to
the results of the psychometric tests, I am the type of the person who is
analytical, logical, and thoughtful. These strengths support the opinion that
my characteristic and personality fit my future career, and which increases
job satisfaction. On the other hand, I also found some weaknesses that
have a negative impact on my future career. The results of the tests show
that I am introvert and not outgoing. In order to be an outstanding financial
analyst, I need to have a good communication skill. The above-mentioned
two helpful methods to acquire the skill are cognitive input and interactive
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demonstration. So, by accessing relevant books and lectures for the
cognitive input and by simulating real situations with trainers who
demonstrate key skill in action for the interative demontstration, I will try to
improve my shortages. In addition, lifelong learning activities also will help
me strengthen my strengths and make up for my weaknesses.
In the section B, I chose the subject of future direction of International
Financial Safety Nets (IFSN) in unstable economic environment. The
reason why I chose the topic is to fully understand about current economic
environment and the importance of IFSN, and to find solutions and
suggestions for reinforcement of IFSN that are supported by financial
experts. It was possible to gain extensive knowledge on financial crisis,
current financial environment and diverse means for preventing and
responding financial crisis through investigating relevant literatures. I am
sure that the knowledge improved the abilities needed for my future career
as a financial analyst. Especially, through the literature review, I got deep
understanding about how financial crisis occurred and spread, and what
riffle effects financial policies have, and which will be helpful to improve
accuracy of my decision making as a financial analyst in the unstable
global financial market. In addition, I could not only learn referencing and
critical thinking skills but also improve my transferable skills such as
Information gathering and Organisation and English writing skills.
In conclusion, this professional project helped me identify who I am, and
acquire specialist knowledge related to my future career. In addition, I
improved my transferable skills such as English writing, Information
gathering and Organisation skills as well as referencing and critical
thinking skills. I am confident that these lessons from the professional
project will be really helpful for my future career and my life after
graduating.
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