What Led to the Over-Extension of Credit by Some Private

question 57

Essay

What led to the over-extension of credit by some private banks and central banks in the euro zone prior to the 2009 euro crisis?

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Definitions:

Cash Flows

The entirety of funds transferred inwards and outwards of a business, which is vital for maintaining operational liquidity.

Annuities

Financial products sold by financial institutions that are designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time.

Present Value

The current financial value of money to be obtained in the future or upcoming cash flow payments, quantified by a particular rate of return.

Cash Flows

The total amount of money being transferred in and out of a business, especially as affecting liquidity.