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2009 | Buch

The UK Banking System and Its Regulatory and Supervisory Framework

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An account of the principal phases in the development of the English banking system, and an analysis of the financial structure of the economy of the UK. The book focuses in detail on the regulatory and supervisory aspects of the UK banking system, and the interactions between the structural aspects of the banking and supervisory system.

Inhaltsverzeichnis

Frontmatter

Banking and Financial Markets

Frontmatter
1. The Structure of the Banking System Between the 1960s and the 1980s
Abstract
This chapter can be really defined as ‘historic’, because of the great changes that have affected the British banking system after the 1980s. Even if no gap can be found in the evolution — institutional, structural, operational — of the system (‘historia non facit saltus’), it’s undeniable that the present configuration bears only a thin resemblance to the previous morphology, legislation, functions. At the same time, this retrospective view of the banking and financial industry, also in its interactions with public policy issues and cultural frameworks then prevailing, is useful in order to put in focus the situation of today, and to understand better the most recent turmoil and its possible (not necessary) outcomes.
Carlo Gola, Alessandro Roselli
2. The UK’s Financial Structure and Economic Sectors
Abstract
Before examining the structure and regulatory framework of banking and financial intermediation in the last fifteen years, it appeared desirable to provide an analysis — albeit with a broad sweep — of the country’s financial structure, in view of the powerful influence this exerts on the activity of intermediation. Looking at these aspects also implies mentioning some major economic and political issues that have been a feature of the United Kingdom over the years and exercised a major influence on its financial structure, especially as regards the effects of policies — some going back to the 1980s — such as the privatization process, pension reform and the deregulation of the building societies sector.
Carlo Gola, Alessandro Roselli
3. The Development of Private Pension Schemes and the Pension Reform
Abstract
Earlier, we considered households’ substantial and growing investment in pension saving. This investment is closely related to the limited role of public pensions. The interaction between public and private pensions is easier to understand if set against a historical background. UK private pension provision, both occupational and personal, has roots reaching far back into the past. Its growth was subsequently influenced to a considerable extent by the birth and successive reforms of public pension provision.1 These reforms have become stratified over time, making the pension system extremely complex and very difficult to reform radically. In this respect reference has been made to the path-dependent nature of pensions and stress placed on the ‘problem of history for any radical reform of British pensions’.2
Carlo Gola, Alessandro Roselli
4. The Configuration of the Banking System in the Last 15 Years
Abstract
Before going on to describe the structure and the performance of the banking industry in the last fifteen years or so, four considerations are necessary.
Carlo Gola, Alessandro Roselli
5. The Stability of the British Banking Sector
Abstract
This chapter is divided into two sections, the first deals with a short survey of the main banking crises in Britain completing the information already given in Chapter 1 (related to the crises of the 1970s and 1980s) with an illustration of the crises that occurred in the 1990s, mainly the small banks crisis of the early 1990s — the Bank of Credit and Commerce International (BCCI) and the Barings bankruptcies of 1991 and 1995, respectively.
Carlo Gola, Alessandro Roselli
6. Markets and Market Infrastructures: Institutional and Prudential Aspects
Abstract
In previous chapters we have seen how the configuration of financial intermediation changed, through further consolidation and the blurring between various segments of the industry. What emerges from this chapter is that, alongside the blurring between banking and other intermediaries, there is a similar phenomenon between exchanges and the OTC market.1 In perspective, it is possible that an increasing number of transactions between financial intermediaries performed on a bilateral basis in the OTC market will be settled through clearing houses, thereby reducing (but not eliminating) the counterparty risk for a number of more standardized transactions, which is a typical feature of the regulated and organized markets. The development of financial engineering, both in products — especially derivatives — and in market infrastructure, such as integrated electronic platforms, underpins these market transformations but also introduces new regulatory challenges. These markets are interconnected through the activity of both domestic and large foreign complex financial institutions. These intermediaries are active in structured products where a large volume of transactions simultaneously involves organized markets and OTC markets, both on-shore and off-shore.2
Carlo Gola, Alessandro Roselli
7. The Sub-prime Mortgage Market Crisis and Its Effect on the UK Banking Sector
Abstract
In August 2007, a serious credit, liquidity and confidence crisis started in the CRT market and spread, at the global level, into the inter-bank market. The deterioration in the American mortgage market was, however, only one component of the crisis. The search for yield, stimulated by years of low interest rates and high liquidity, had promoted the developments of increasingly complex products, which in turn brought serious mis-pricing of risk in a number of financial assets. Increasing and unexpected correlations among different classes of assets and markets emerged. This was particularly remarkable for assets linked to mortgage credit: with the increase in interest rates and decreasing house values, it is inevitable for borrowers to face difficulties. This situation was particularly worrying in the US, where the sub-prime mortgage market is wide, but the turmoil spread rapidly in other markets and countries as well.
Carlo Gola, Alessandro Roselli

The Legal and Regulatory Framework

Frontmatter
8. The New Regulatory Framework: The Financial Services Authority
Abstract
It is difficult to find a single, major cause for the creation of the new regulatory framework in the UK, but several factors have contributed to the reform, that have spanned a period of approximately four-years. The creation of complex financial intermediaries had caused the distinctions that had previously characterized the financial sector to become blurred. Banks did not appear to be ‘special’ anymore or at least not as special, as before, now being in competition, both on the provision and on the gathering of funds, with other financial institutions, and entering themselves into other fields of financial intermediation, while the regulatory structure remained fragmented, and still very much reliant on self-regulation.
Carlo Gola, Alessandro Roselli
9. The Combined Code of Corporate Governance
Abstract
This chapter offers a short overview of the Combined Code of Corporate Governance. It is not intended to be an exhaustive survey of the corporate governance of the United Kingdom, but rather it outlines the main features by describing this prominent example of self regulation. This approach — used often in common-law countries — adapts itself especially well to a sector such as the financial one, which is constantly evolving. It provides for a form of flexible regulation, based more on principles than on rules and therefore can be updated more easily than statute legislation.
Carlo Gola, Alessandro Roselli
10. The Competition Act (1998) and Related Regulatory Framework
Abstract
Among the institutional and legislative reforms of the Labour government, there is the question of the protection of competition. As in other fields, the aim was to provide the country with a system for governing the economy based on independent, transparent and accountable entities with broad enforcement powers. As already noted in Chapter 4, in this field specific legislation does not exist for the banking sector, which is considered on a par with any other productive sector, apart from one important exception concerning agreements and abuses of dominant position, as will be shown below.
Carlo Gola, Alessandro Roselli
11. Conclusions
Abstract
We have tried to assess the financial sustainability and the configuration of two sectors of the UK economy — households and businesses — which appear crucial for understanding the features of the financial industry. We have also added a third sector, the foreign component, which is particularly relevant for Britain, given the high openness of the economy and the relevant amount of cross-border transactions by banking and financial intermediaries.
Carlo Gola, Alessandro Roselli
Backmatter
Metadaten
Titel
The UK Banking System and Its Regulatory and Supervisory Framework
verfasst von
Carlo Gola
Alessandro Roselli
Copyright-Jahr
2009
Verlag
Palgrave Macmillan UK
Electronic ISBN
978-0-230-23577-9
Print ISBN
978-1-349-36038-3
DOI
https://doi.org/10.1057/9780230235779