A Bankruptcy of Faith?

It is said that whenever the going gets tough, the tough get going. However, the adage seems to be struggling to retain its validity at the present moment with the juggernaut of the economic meltdown threatening to leave no tough ones standing. The financial crisis has slowly morphed into a crisis of faith. The big financial institutions of the world, the providers of solace and security in times of monetary distress, seem to be fighting a stiff battle to keep faith in their own selves. People are running scared of the very institutions that they had banked on to secure their future. So far, people have relied on rating agencies and audit reports to gauge the health of any particular banking company. However, the implosions of banks and finance companies boasting of sky high ratings and infallible track records have left the common man in a tizzy. Today, he just doesn’t know who to believe. Sudden collapse of mega finance companies have become almost the order of the day. Panic has set in like never before as people scurry to banks and ATMs to withdraw excess money for fear of losing their savings at one stroke.

The reason for all this panic and chaos can be attributed to one big flaw in the entire world financial system - lack of transparency, and that eternal vice - greed. As it is, customers and depositors have started questioning the methods applied by the banking and finance companies to increase their profits. Yet, there are no answers to many such questions. All that people get are sugar-coated media statements insisting that everything is rosy. Such statements, however, do little to assuage the fears in the minds of people who have so far trusted banks with their life savings. A gripping paranoia that a bank or a finance company may declare bankruptcy overnight has overcome the laity. Although this wave of fear and distrust has wrought maximum damage mainly on the institutions in the western world, trepidations of the same have crept into India and the rest of Asia as well. In India, ICICI bank has recently been the target of “malicious rumors” as depositors made bee lines at its ATMs and branches to retrieve their money. Subsequently, the ICICI bank management and the government regulatory authorities came out in defense of the bank assuring investors of the “robust” health of the bank. Nonetheless, investors are a wary lot nowadays, and it needs just one spark to trigger their paranoia into panic reactions. In fact, the more the banks try to reassure investors, the more deeply the suspicion of something fishy afoot sets in the minds of the customers. The need of the hour is for the institutions in question to come out in the open about their investments and leverages and lay all the facts of their accounts bare before the public. Until that happens, though, this all-pervasive fear psychosis will continue to haunt the minds of billions of depositors and investors and the bankruptcy of public faith may well translate into an economic apocalypse.



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