The instability in the UK banking system is now a hot topic on the specialized blogs and forums, considering that those problems affect not only the UK economy, but also the financial stability of the world. The tendency of large companies to gather under a single entity by forming international conglomerates, the free circulation of goods within the European Community and the independence of the exchange course were considered as beneficial until some time ago. However, in the latest period, those concepts that were the engine of capitalism and economy are now considered the main factors that resulted into the financial recession.
The globalization tendency also implied the UK banking system, although it is known that UK banks are reluctant when it comes to new concepts and ideas. The banking system was market by fusions between large banks, but also acquisitions and cooperating agreements. However, even if the process was accelerated during the latest years, the UK banking system is somewhat isolated from the rest of the financial international entities. The concept of Universal Banking must be introduced there also, as it is mandatory to have some system of high technology. Those systems will contribute to the improvement of the financial world, creating new possibilities for the clients to administrate their money.
The structure of UK banking system resembles with the same systems of other EU countries, with the difference that the mechanisms are somewhat rigid, having a passive role in the economy. The system was reformed some tome ago, with the National Bank playing an important role as a mediator. This is how the environment for new investment banks was created, an environment that was speculated by the international investors immediately.
The UK banking system, just as the one of other countries is now considered a fragile area of the economy, as it feels the shockwaves produced by other branches immediately. The bankruptcy of major industrial companies affected the banks greatly, but the National Bank adopted a preventive policy that allowed the commercial banks to avoid major problems. The National Bank easily renounced its role as a commercial bank, adopting the role of a mediating institution and a regulating entity for the rest of the banks.
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The UK banking system is also marked by the presence of several international banks, and the measurements adopted by the National Bank several decades ago were proven as effective. The minimum capital requests adopted by the National Bank, the freedom on the stock market and the maximum debt percentage are only a few of the regulations that helped the creation of a healthy system. Today, the UK banks have to face a new challenge: the Forex market that is the source of serious incomes, but also a source of risks and problems. The banks have the tendency to overuse the system, and this is why major problems might appear. It is the responsibility of the National Bank to regulate the system and to make sure that the operations conducted by the banks don’t affect the real economy.
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