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Homework answers / question archive / Introduction on UK banking system please answer it in 200-300 words
Introduction on UK banking system please answer it in 200-300 words
Currently most banks in the United Kingdom offer very similar services, distinguished only by differing interest rates. Indeed, a very recent trend has been to not advertise interest rates as this avoids the banks having to offer such advertised rates to at least 60% of their customers.
In 2006 the Office of Fair Trading found that the banks were exploiting penalty bank charges on credit cards and has suggested that banks restrict such penalty to a maximum of 12 UK pounds. Penalty charges or Liquidated damages are illegal in UK contract law unless they represent the real cost of a breach of contract incurred through an unauthorised overdraft level or bounced cheque.
This ruling by the OFT had been taken by many customers to extend to their personal bank accounts and subsequently the UK small claims court system was flooded with cases of customers reclaiming these ‘illegal’ penalties. It was reported[4] that nearly 1.8 million template letters to take the banks to court had been downloaded from the website MoneySavingExpert.com.[5] In October 2009 the Supreme Court overturned previous rulings that allowed the OFT to investigate overdraft charges, bringing to an end such claims.[6] Although initially the OFT said it would look at other ways to pursue the matter, in November that year it decided not to continue with further action.[7]
Heads of major British banks met with the governor of the Bank of England following days of market pressure on lenders' stocks. The Bank of England said after the 20 March 2008-meeting that participants had "agreed to continue their close dialogue with the objective of restoring more orderly market conditions."[1]
As of 11 October 2008, the British banks have short-term liabilities equal to 156% of GDP or 368% of the British national debt, while the average leverage ratio (assets/net worth) is 24 to 1.[8]
The Financial Services (Banking Reform) Act 2013 calls for a paradigmatic shift toward the principle adopted by the US of risk averse strategies. This manifests itself in the form of "ring-fencing" retail banking to protect consumers and creating requirements for certain amounts of capital to be retained to act as a buffer against market instability. This reform is set to support the strengthening economy and is a response to the Financial crisis of 2007–08.[9]
Over the past 40 years (to 2014) the banking system in the UK experienced a 'dramatic shift' with total assets increasing from 100% of GDP to 450%, and it is 'plausible that the UK banking system will continue to grow rapidly', owing to its probable 'comparative advantage' in international banking services, with the pre-eminence of London as a financial centre.[10]
As of Dec 2015, a number of new banking licences were secured, e.g. by Atom Bank and Tandem Bank.[11]
In 2017, Business Insider came out with a list of the 18 most profitable banks in the United Kingdom while stating that the banks were now becoming profitable after facing challenges for the past few years. The top spot was grabbed by HSBC with an income of £5.49 billion followed by Lloyds with a profit of £4.04 billion.