Financialization and its Impact on the Financial Sector and Household Behaviour

Assignment Brief

Module Title:	Anatomy of Financial Crises	Module Code:	6BUS1002
Assignment Format & Maximum Word count	Referred/Deferred Assessment: Essay	Assignment Weighting:	70%
Internal Moderator	Approved ☐ Date:	Module Board name
External Examiner	Approved ☐ Date:	Module Board date

Assessment Criteria

Learning Outcomes: Knowledge and Understanding tested in this assignment:

LO 1- the interdependency between national economic policies and international economic/financial structure LO 2 - the key concepts and approaches used in the analysis of financial crises LO 3 - the distinct, country specific features of financial crises as well as observable common causes in cross country analysis

Learning Outcomes: Skills and Attributes tested in this assignment:

LO 4 - demonstrate a capacity to evaluate the symptoms of financial crises in different case studies LO 5 - discuss the strengths and weaknesses of various theories in explaining the emergence of financial crises LO 6 - reflect on case specific and more common causes of various financial crises covered in the module LO 7 - develop an ability for policy advice in relation to financial crises and advance their presentation and teamwork skills

Feedback /Marking criteria for this Assignment

Performance will be assessed using HBS Grading Criteria and Mark scheme.  Guidance for improvement will be given in writing on the Assessment Feedback Form or on the StudyNet Feedback Form within 4 weeks of submission. Late assignments up to one week late will be reduced by 10 grade points per day will receive a maximum numeric grade of:  Levels 4, 5 and 6 (UG) – 40 Level 7 (PG) – 50 Plagiarism offences will receive standard penalties.

Assignment Title: Referred/Deferred assessment: Essay

Description of the assignment:

Students, who score an average final mark that is below 40% and above 19%, will have to submit an essay on the following topic with 4000 words if they failed both assignments and with 2500 words if they failed only one element:

Essay Topic:

How has financialization changed the financial sector and household behaviour? Can financialization theories help us understand the 2008-9 crisis?

Mark scheme:

e.g.	Weighting
Presentation and structure (including Harvard referencing)	15%
Content (including research)	25%
Breadth and depth of knowledge	30%
Critical analysis and evaluation	30%
Total	100

Student Support and Guidance

• For further help, contact your module leader in their drop-in hours or by email.

• Use the Grading Criteria and Mark Scheme to help improve your work.

• Go to CASE workshops, use the CASE website and drop-in hours www.studynet.herts.ac.uk/go/CASE/

• Academic English for Business support is available through daily drop-ins from the CASE office.  See the CASE workshop timetable on the CASE main website page for details.

• Make full use of Library search to identify relevant academic material and the ‘Subject Toolkit for Business’ which contains links to other Information Databases and the Information Management contact details. (http://www.studynet1.herts.ac.uk/ptl/common/LIS.nsf/lis/4DAF5390094771C2802575ED004212BF) 

Some tutors allow students to test their work using Turnitin.

Sample Answer

Financialization and its Impact on the Financial Sector and Household Behaviour 

Introduction

The global financial crisis of 2008–2009 marked one of the most disruptive economic events in modern history. To understand its causes and consequences, it is necessary to explore the concept of financialization, which describes the growing importance of financial markets, institutions and motives within the wider economy. Financialization has transformed how financial systems operate and how households engage with credit, debt and investment. This essay examines how financialization has reshaped the financial sector and household behaviour. It also evaluates whether financialization theories can explain the origins and severity of the 2008–2009 crisis.

Understanding Financialization

Financialization refers to the increasing dominance of financial actors and motives in economic life. Scholars such as Krippner describe it as the shift from production-driven growth towards profit-making through financial channels. Epstein defines it as the expanding role of financial motives in shaping policy and business strategy. Key features include the deregulation of financial markets, the growth of speculative instruments, the expansion of household credit, and the influence of shareholder value as a guiding principle for corporations.

By the late twentieth century, financialization had become a defining trend in advanced economies. The liberalisation of capital markets, technological innovation and globalisation of trade facilitated a more integrated financial system. Governments increasingly relied on capital markets to support economic growth, while households were encouraged to borrow and invest as active participants in financial markets.

Transformation of the Financial Sector

The financial sector has been deeply transformed by financialization. Banks evolved from traditional institutions focused on deposit-taking and lending into complex actors engaged in investment banking, securitisation and derivative trading. This shift was partly driven by deregulation, such as the repeal of the Glass-Steagall Act in the United States, which had previously separated commercial and investment banking.

Financial institutions increasingly sought profit through speculative activities rather than traditional lending. Complex financial products, such as mortgage-backed securities and collateralised debt obligations, became central to the sector’s operations. These innovations expanded liquidity and allowed risk to be distributed globally, but they also created opacity and fragility.

Another key change was the emphasis on shareholder value. Corporations shifted their priorities from long-term investment in production to short-term gains for investors. The financial sector played a critical role in reinforcing this ideology by rewarding firms that maximised returns to shareholders, often at the cost of wider social and economic stability.

Impact on Household Behaviour

Financialization also reshaped household behaviour by embedding financial practices into everyday life. Households became increasingly reliant on credit to sustain consumption and housing investment. Mortgage lending expanded rapidly, fuelled by low interest rates and securitisation practices that encouraged risky lending. Homeownership was promoted not just as a social good but also as a financial asset, with rising house prices seen as a source of wealth.

Households were also drawn into financial markets through pensions, insurance and investments. The decline of state welfare provisions in many countries shifted risks from the public sector to individuals. Retirement security, healthcare and education became increasingly linked to private financial products, leaving households vulnerable to market volatility.

The pursuit of debt-driven consumption and asset accumulation made households more exposed to financial shocks. When the housing bubble collapsed in the United States, millions of families faced foreclosure and long-term financial insecurity. The crisis revealed how financialization had created systemic risks not only for institutions but also for ordinary citizens.

Continued...