1. Sub Prime Mortgage Crisis Hae Jin, Eun Joo & Philipp

2. Sub Prime Mortgage? FICO Payment History Amount Owed Length of Credit History New Credit Types of Credit Use

3. PRIME (more than 680 ) : about 6% Sub Prime Mortgage ( 620 Down) : 9~10% Alt – A ( 620 ~680 ) : 7~8% FICO Fixed rate -> Adjustable rate after 2 YEARS

4. Why It Happened? S & LA Bankruptcy LTCM Bankruptcy Asian Financial Crisis Terrorist Attacks Low Rates + House Price up = Sub. Mortgage UP

5. Crisis Goes Global Borrower Low credit Sub prime mortgage Lender Higher Rates Sell Mortgages Repayment Loan Financial Firms Mortgage-based Securities Sell Mort. Invest. Hedge Funds Private Funds Sell Securities Investors Individual Corporate Sell Securities Invest.

6. Crisis Goes Global To .. (as of 8.31) * New Century Financial Bankruptcy * Bear Sterns 3 funds in trouble * American Home Mortgage Filed for Bankruptcy * BNP PARIBAS 3 funds in trouble * Basis Capital 2 funds in trouble * Fortress Investment 25% loss in hedge funds * Absolute Capital 2 funds in trouble * Commerzbank 1.2 billion euro loss * IKB 1.3 billion dollar loss * NIBC 200 million dollar loss

7. Reasons: Who to blame? Borrowers? Lenders? Technology? Nescience Info Source: Lenders advise Risky lending practices Complex security system 90% banks use FICO Model works with given data

8. Case 1 - Germany 1995-2007: $26.6 billion Rhineland Fund ( US sub-prime mortgage market) Mid-sized enterprises in real estate IKB Principal Shareholder: KfW Bank Group

9. Impacts and Effects $1.040 M Loss + - 71.36% in Stock Value Enormous value drop! Loss of investors

10. So, Now.. Recovery Package of $5.18 B KfW: Under Pressure from Government Rhineland Fund risk precaution up to $ 7.1 B

11. Case 2 - ASIA loss : $2.5 million -> IR Bad lending rate : amounted by 7 times Invest: $850 million Loss: $85 million

12. Hang Seng KOSPI Asian Stock index hitting its lowest mark Case 2 - ASIA Nikkei 225 -13.1% -16.4% -18.3%

13. Limited impact on Asia 2. Few funds directly invested into the US S.M. 1. Abundant cash in the region's banking systems

14. Negative "The Two different scenario Positive Market volatility Asian bank: locally focused & conservative Mortgage-backed securities (CHINA) Credit Crunch Hits Asia debt issuance Uncoupling Asia Thanks to China Dropped CR US: ASIA

15. Prospects Another crisis coming -> Next year Spring (those in the late half of 2005) Believe in China’s Power But, already prepared & Financial tech. improvement Europe Asia Conservative banking & Decoupling with the US

16. Prospects… Thanks to China and India

17. Prospects… Strong momentum

18. Thanks for your patience ^^ Hae Jin, Eun Joo & Philipp