Banking Reforms

Banking Reforms

Introduction

The financial crises are leading towards many flaws in the financial system of United Kingdom. Bank ran risks even though they did not understand the risk and on the other hand, investors did not put sufficient pressure on the financial institutional to manage risks efficiently and effectively and bring some securities in the market which are more secured. Domestically United Kingdom reforms are overhauling the regulatory architecture and they are ensuring that new authorities have tools to deliver regulations effectively. They have also taken steps on unnecessary remuneration in the banking sector of United Kingdom. United Kingdome is also working internationally to shape European regulations to reform capital and liquidity standards of banks, regulations of insurers and derivates trading (Department of Business Innovation and Skills, 2012).

Good progress has been made but there is lot more to do especially in non-banks, investment banks and in promoting competition in banking sector. Banking reforms are considered as the fundamental part of the government to create safe and stable banking sector of United Kingdom. ICB (Independent Commission on Banking) and Sir John Vickers has given recommendations and proposals for developing competitive banking sector in United Kingdom. They also want to maintain the position of Britain as home of world's leading banks without revealing the taxpayers of British to the unacceptable cost of banks who are failing in disorderly manner. Financial institutions plays important role in the economy of United Kingdom (Department of Business Innovation and Skills, 2012).

There are around 1.4 million people employed in this sector and contributing tax of 63 billion Euros. In this paper evaluation will be done on the statements given by Sir John Vickers on the white papers reforms. According to their point of view white paper reforms can even go further to make the banking system safer. In this paper the main areas are identified in which white paper differs from the initial proposal given by Sir John Vickers. The appropriateness of the white paper will be discussed in term of proposal in the current banking climate. There are three main parts of the white paper reforms which are; ring-fencing, loss-absorbency and competition. Each part will be discussed and analysis would be done on the claims made by Sir John Vickers in the proposal (Department of Business Innovation and Skills, 2012).

Differences in Initial Proposal and White Paper

The white paper supported the ICB recommendations broadly in building ring-fencing around the retail banking of United Kingdom. The government has committed to complete the necessary legislations give the effect to ring-fencing till 1015. The full implementation of the reforms will be done till 2019. Many questions form the reforms have been left unanswered by the government and of the issues have been addressed at higher level. There are around 49 questions in the white paper which are left open for the discussions which means that clarity is needed in detail. The answers given by white paper provide intend to reduce the impact on banks of United Kingdom on the recommendations of ...