5 Trends and Issues in Finance

Current issues in finance include the economic and regulatory impacts of the financial crisis and the growth of new types of finance.

The financial crisis of 2007–2008 caused the near-total collapse of many large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. The financial institution crisis hit its peak in late 2008. Several major institutions failed, were acquired under duress, or were subject to government takeover, including Lehman Brothers, Citigroup, Fannie Mae, and Freddie Mac, among several others.The crisis rapidly developed and spread into global economic shock, resulting in a number of European bank failures, economic crises in Iceland, declines in various stock indexes, and large reductions in the market value of equities and commodities. A currency crisis followed, with investors transferring vast capital resources into stronger currencies. In many areas in the United States, the housing market also suffered, resulting in significant numbers of foreclosures. The crisis played a significant role in the failure of key businesses, declines in consumer wealth, prolonged unemployment, and a downturn in economic activity in the United States. It also led to a global recession and a sovereign debt crisis in Europe.

Critics of the financial crisis have argued that the regulatory framework did not keep pace with rapid innovation in financial markets and have asked for increased regulation and enforcement. Various regulatory reforms have been passed in the United States, and European regulators introduced Basel III regulations for banks.

Growing areas of business

Microfinance is the provision of a wide range of financial services, including savings accounts, to the poor. Microcredit is a part of microfinance and involves the extension of very small loans (microloans) to impoverished borrowers, often with the goal of supporting entrepreneurship and/or alleviating poverty.

Peer-to-peer lending over the Internet is another growing development in the financial sector, to which the principles of microcredit have also been applied in attempting to address poverty as well as various non-poverty-related issues. Such efforts include crowdfunding, a term describing the collective effort of individuals who network and pool their resources to support charities initiated by other people or organizations. The rules for crowdfunding are still being developed, and the Securities Exchange Commission has yet to set rules in place for equity crowdfunding campaigns involving unaccredited investors for private companies.

The growing field of impact investing refers to investments made based on the practice of assessing not only the financial return on an investment, but also its social and environmental impacts.

Employment in Finance

The financial sector is a large field offering many different types of employment for a broad range of organizations that manage money.

In banking, employees may serve the range of roles needed to run banks, from tellers to financial planners and underwriters to wealth managers. Workers may be employed in a variety of functions by credit card issuers, such as customer service, foreign exchange service, high-profile trading, and airport currency exchangers. Financial analysts may work for government investment funds, mutual fund companies, hedge funds, private equity investors, and investment banks. Credit analysts work in a variety of institutions to assess the creditworthiness of firms, governments, or individuals for loans. In insurance, there are insurance brokers and underwriters as well as actuaries and a host of other positions such as insurance claims investigators and agents.

Intermediaries exist not just in the insurance business. Stockbrokers, for instance, assist investors in buying and selling shares. There are also investors called venture capitalists and angel investors. Finance professionals may also work in public finance, for local or national governments, or in corporate finance.

Growth in microfinance and microcredit has also opened up employment opportunities in finance both in the US and abroad. Sophisticated mathematical and technological developments have also advanced the field of quantitative analysis for those who work in investment management, risk management, derivatives pricing, algorithmic trading, and other areas that require the application of mathematics in finance.