FINANCIAL SERVICES INSTITUTIONS

Financial Services Institutions in the UK



Financial Services Institutions in the UK

Financial Service Sector in the UK

The UK financial services sector is controlled excessively by a single business model, namely the large, shareholder-owned plc. This domination of the shareholder ownership model, whose purpose is to maximize financial returns to the shareholders proved a lethal combination with the financial deregulation, the creation of new financial instruments and the subsequent rising levels of debt over the past twenty years (Shostak and Houghton, 2008, 126). Ever greater risks were taken to drive up financial returns and 'shareholder value', culminating in the global credit crunch of 2007-2008 which in turn created the first global recession since the 1930s, during 2008-2009, from which the UK and global economies are only slowly recovering.

The credit crunch, which was caused by the activities of private-sector banks, resulted in the UK Government giving them a bailout (Personnel Today, 2008, 1). In addition, the Government borrowed in order to provide the fiscal boost that was coordinated internationally to prevent a slide into global depression. These costs, along with the additional hit to Government finances that a recession causes as tax receipts fall and unemployment benefits and other such payments rise, have combined to create the fiscal deficit and accumulated debt that we are all having to pay for through increased taxes and cuts in services (Saunders, 2006, 85).

Northern Rock Bank

Northern Rock (NR) is a relatively young company which was founded in 1965 by the merger of two building societies, both of which were well established, however. The company has grown by buying smaller companies relative, the last in 1994. Later, the company is listed on the stock market to raise more capital. Because the company was founded as a mutual society and its existence was in the interest of the community, Northern Rock Foundation was established to facilitate fears that the company has been distancing himself (via floatation) from the community it was created to help initially. Northern Rock has become aggressive in their growth and decay before they were top 5 UK mortgage lenders (Shostak and Houghton, 2008, 126).

However, the foundation of their business model was not hard, it was risky, because they just borrowed money from other banks, and they have a small deposit base, only 25% at one point, other banks, at least 45%, so they could use their own liquidity to finance lending. It was the subprime crash in the U.S., who began the conversation. Yes, that unfolded in the U.S. was a dramatic effect on the financial markets, but it is just as much to do with how it has affected his contemporaries, who in turn hit Northern Rock, some banks in Britain had billions invested in the market.

Bank of England

Central banks are the bodies responsible for developing and implementing monetary policies, i.e.to control the amount of money in circulation and to set interest rates in the economy, to maintain price stability (low inflation) and an adequate level of economic ...