Analysis of the UK Banking System

Analysis of the UK asserting SystemA strong and efficient commiting governing body is a key to progress in a country.To achieve an efficient a patoising system one should analyze the internal and external factors of that country. For this issue I accept chosen ENGLAND readying system to know its internal and external factors faced by its verifys? what kinds of affirms atomic number 18 operating in uk?,what kinds of activities ar actualizeed by them?what are the sources of finance in uk?what is the evolution of banking in uk?what is the role of central bank in uk?etcFirst of all a motion raise in our mind what is meant by system?System is an integrated collection of contrasting part of a body which performed specific function for example banking system of uk it has many banks in parts which perform different functions like commercial banking, enthronization banking,specialized banking and central bank collectively known as banking system of uk.In uk banking system it has a central bank which is cant of England .IT is the pointedness of all the banks it control and regulate the affair of all schedule banks like HSBC, Barclay Bank and ROYAL BANK OF SCOTLAND all these banks deals in day to day functions of receiving sediments and forward finances to the public.Banking system stability depend upon the external factors much(prenominal) as saving ,national income,industrial growth and development,government policies and internal factors such as bank ability to line of products the deposit safely to the borrowers normally industrial sector.Benefits of a strong banking system in uk is that it will channelize the idle money from the hands of depositor to the one who undeniable such finances to invest It in that place which is useful for the development of the uk.Strong banking system of uk is playing an important role in increasing the saving of the concourse by providing incentives by giving them attractive interest rates.The banking system of uk i s similarly helpful for the creation of new industries by providing finances to the industrial sector.The banking system of uk is alike providing finances for the promotion of trade and commerce.Banks depict finance to the industry and the public as well and charge interest on it and earn profit for the bank.A question comes in our mind are banks important finance provider for the industry externally or other sector contribute in it the most.i have departed through an article of colin mayer.in this article he compare the investment activities and sources of getting the finance in venture detonator in some countries like uk, germany lacquer and other countries he concluded that the souces of funds and investment differ in different countries due to financial system,economic condition, geographical factors and sectors difference.For example the amount of fund unavoidable in germany and japan are main(prenominal)ly cover from banks,corporation sources in Israel and pension fun ds sources in UK.Sources of finance analysisIn ENGLAND 44% OF THE FINANCES are COVER FROM BANKS BUT MAIN SOUCE IS PENSION FUNDS WHICH SHOWS 49% FINANCIAL SOURCING MEAN IN INDUSTRY.Following data displays the sources of external finance for the industry in the four diferrent countries,showed some important facts. In Germany, banks provide the main source of finance for the VC industry, and pension funds. By contrast, in the ENGLAND pension funds provide the main source of finance for the VC industry, other groundingal investors, and individual investors PLAY AN IMPORTANT ROLE IN FINACEING THE INDUSTRY OF MANY COUNTRIES as many companies as banks. verso to touristy views, government atorities also play an important role for (typically local authority) funding plays a much important role in the United farming than it does in Germany, and is negligible in the other countries.Table 1. Sources of external funds for the VC industryThis table reports sources of funds of VC firms in Ge rmany, Israel, Japan and the United estate establish on binary and not mutually exclusive responses to a question of whether or not a particular fund uses a certain source. beautify A displays the proportion of funds that report using a given source. Panel B displays the percentage of funds using one, two, three, or four or more sources.Mean values which are statistically different from those of the United Kingdom at the 10% level.Mean values which are statistically different from those of the United Kingdom at the 5% level.Sources of funds for the Israeli VC are banks from the above figure it is shown, with industrial corporations (typically from the United States) being the single most popular source of funds. In Japan, non banking financial institutions (e.g., securities firms, credit card or leasing companies and mortgage institutions) are the single most important category of finance among Japanese funds, followed by banks and insurance companies.9 It is quite common in Japan for the owners/providers of finance for Japanese VC funds to be all affiliated with the same bank-centered corporate group, or to be otherwise related to each other. In over half of the Japanese funds in our sample, at least three of the five largest shareholder providers of finance are related to each other or affiliated with the same group.VC funds in Germany tend on average to use fewer sources of funds than do VCs in other countries (Table 1, Panel B). By contrast, funds in Israel, Japan and the United Kingdom tend to use many sources of finance in particular, about a third of the UK funds report using at least four different sources.10 Relying exclusively on bank finance is also very common in Germany over 60% of the VC funds that raise money from banks use this source exclusively the corresponding figure for the United Kingdom is about one-third, and for Israel about one-fifth. Surprisingly, despite the typical characterization of the Japanese economy as bank dominated (like Germany), only one-seventh of the Japanese VC funds in our sample rely exclusively on bank finance.EVOLUTION OF BANKING IN UK AND ITS DEVELOPMENT STAGES The birth of modern UK BanksStrange as it may seem, UK banking can tie its origins back to the days of the Roman conquest. During the geological period of the Roman conquest of Britain, Romans conducted two forms of banking business one, called argentarii, of a professional nature the other, called feneratores, of an amateur nature run by the elite nobles of the Roman Empire.What was said to characterise this institution was the two-fold service of (a) receiving deposits and (b) advancing credit. Modern UK banks evolved in the 1530s., it was not really until approximately 400 old age ago, during the mid-1600s, that capital of the United Kingdom really started to make its position as a financial backbone of importance when goldsmith bankers started to emerge, following King Charles I seizure of gold deposited in the Tower of Londo n and the English Civil state of war, as a safe-haven (away from the clutching arms of the Crown) for the gentry and aristocracy to deposit their money and valuables. Shortly after this period (circa. 1677), there were a recorded 44 goldsmith bankers in London acting as keepers of running hard currency who ran their business on a own(prenominal) liability basis. However, strict legal controls on how big goldsmith bankers could become (because of the strict individualized liability basis), together with poor transportation and communication, combined to dress the growth of these into national UK banks evidenced of this can be seen in the fact that in 1784 the total number of UK banks exceed 100 but only 7 had more than one office.The wind of changeFollowing a number of prominent UK bank collapses in the early 1820s, parliament finally relaxed the laws governing who could own banks to consent to for joint stock banking (1826) A notable exception to this was the establishment of the Bank of England as a joint stock bank some 200 years earlier this legislation.Importantly, joint stock banking allowed the owners of UK banks to spread the risk among a number of proprietors. This, combined with the Industrial Revolution, better transportation and faster means of communication all resulted in a growth of more national banks in the UK. Prominent among these was the foundation, in 1833, of the National Provincial Bank of England (later to become National Westminster Bank NatWest), the first UK bank established with the specific agenda of being a national bank.Although UK banks began to expand nationally during this period, the function they (did and could) offered did not. Consequently, it was also around this time that another division in UK banks began to emerge namely the formation of the Big Three banking sectorsClearing risque Street Banks even as recently as 1900 there were a describe 250 private and joint stock banks operating in the UKMerchant Banks andOther financial institutions such as create Societies which came into being following 1874 legislationThe Bank of England founded in 1694 to act as the Governments banker and debt-manager. Since then its role has developed and evolved, centred on the management of the nations currency and its position at the centre of the UKs financial system.The history of the Bank is very interesting one. Events and circumstances over the last three hundred or so years have change and influenced the role and responsibilities of the Bank. They have adoptive the culture and traditions, as well as the expertise, of the Bank which are relevant to its reputation and effectiveness and responsibilities a central bank in the early years of the 21st century.The history of the Bank passed different situation and circumstances of to the economic and financial history, political history, of the United Kingdom.If you want to get closer to the Banks history and are visiting London, the Banks Museum provid es a unique insight into the history of the Bank and its business, alongside a great deal of material about the Bank today.Key moments in the Banks history a brief guideKing William Queen MaryWhen William and Mary came in 1688, public finances were not strong. The system of money deposit and advancing it(credit) was in not working efficiently. At that time a national bank was needed to mobilize the saving and investment,the nations resources.MR Willium PetersonWilliam Paterson proposed a loan of 1,200,000 to the Government. In return the subscribers would be able to incorporate the Governor and play along of the Bank of England.The imperial CharterThe money was raised in a some weeks and the Royal Charter was sealed on 27th July 1694. The Banking started life as the Governments banker and debt-manager, with 17 clerks and 2 gatekeepers. In 1734 the Bank moved to Thread-needle Street, gradually acquiring land and exposit to create the site seen today.Commercial functions of the b anksThe Bank managed the accounts of that time Governments and made loans available to finance spending at times of peace and war. A commercial bank took deposits and issued notes.The 18th CenturyDuring the 18th Century the Government borrowed more and more money. These outstanding loans were called the National Debt.1781 renewal of the Banks CharterDependency on the Bank of England was such that when its charter was renewed in 1781 it was define as the public ex chequer.The bankers bankBy now the Bank was acting as the bankers bank too. It was nonimmune to fail if all its depositors decided to withdraw their money at the same time. But the Bank made sure it kept enough gold to return its notes on demand.The Restriction PeriodBy 1797 war with France had drained the gold reserves. The Government prohibited the Bank from paying claims of its notes in gold. This Restriction Period lasted until 1821.The nineteenth CenturyThe 1844 Bank Charter Act tied the note issue to the Banks gold reserves. The Bank was required to keep the accounts of the note issue separate from those of its banking operations and produce a weekly summary of both accounts. The Bank Return, as its called, is still published every week.Lender of last resortIn the nineteenth Century the Bank took on the role of lender of last resort, providing stability during several financial crises.The First knowledge domain War 1914-18During the First World War the National Debt jumped to 7 billion. The Bank helped manage Government borrowing and resist inflationary pressures.GoldIn 1931 the United Kingdom left the gold pattern its gold and foreign exchange reserves were transferred to the Treasury. But their management was still handled by the Bank and this remains the case today.Nationalisation 1946After the Second World War the bank was nationalised. It remained the Treasurys adviser, agent and debt manager. pecuniary crisesDuring the 1970s, the Bank played a key role during several banking crises. T he Bank was at the fore when monetary insurance again became a central part of Government policy in the 1980s.Operational independence May 1997In May 1997 the Government gave the Bank right for setting interest rates to meet the Governments stated inflation target. The was enshrined in the 1998 Bank of England Act.Managing the modern bankThe Banks governing body, the Court of hireors, as its known, is made up of the Banks Governor and 2 Deputy Governors, and 9 Non-Executive Directors (under the Banking Act 2009There are different kinds of banks which are working in different parts of the world main banks are as follows all these banks are specialize in performing speacialized functions of banks.on the basis of different types of functions we have the following bankBank of England is the central bank of England perform fuctions of monetory policy,fiscal policy.issue of notes,bankers banks,lender of last resort to other banksAlliance HYPERLINK http//www.alliance-leicester-group.co.u k/HYPERLINK http//www.alliance-leicester-group.co.uk/ Leicester plcBased in the UK, provides face-to-face and business customers a comprehensive range of mortgage, investment, personal banking and insurance products, cash transmission services and corporate banking facilities.BankHYPERLINK http//www.bank-of-ireland.co.uk/ of IrelandPersonal and business banking in Britain.British HYPERLINK http//www.bankfacts.org.uk/BankersHYPERLINK http//www.bankfacts.org.uk/ AssociationPrincipal representative body for banks active in the UK, with over ccc member banks from more than 60 countries.HSBC Midland HYPERLINK http//www.banking.hsbc.co.uk/BankPersonal and business banking division of HSBC.BankHYPERLINK http//www.bankofireland.co.uk/ of Ireland Northern IrelandBank that provides private and corporate services worldwide.BankHYPERLINK http//www.bankofscotland.co.uk/ of ScotlandFinancial institution that provides personal banking, small-business banking and corporate services.BarclaysBank o ffers personal banking, student banking and international corporate banking.Bermuda Monetary AuthorityResponsible for the licensing of banks, deposit companies and investment businesses.Bradford HYPERLINK http//www.bradford-bingley-int.co.im/HYPERLINK http//www.bradford-bingley-int.co.im/ Bingley InternationalSubsidiary of Bradford Bingley Building Society, a savings and loan bank.Bristol HYPERLINK http//www.bristol-west.co.uk/HYPERLINK http//www.bristol-west.co.uk/ WestSpecialists in mortgages, savings and investments.Cheltenham HYPERLINK http//www.cheltglos.co.uk/HYPERLINK http//www.cheltglos.co.uk/ GloucesterProvides mortgages, investments, savings and loans.HSBC Investment HYPERLINK http//www.cibm.hsbc.com/hsbcBankProvides the advisory and financing, equity securities, asset management, private banking and trustee, foreign exchange and capital markets trading, debt funding and treasury activities of the HSBC Group.Citibank UKProvides personal banking in the UK.Co-operative HYPE RLINK http//www.co-operativebank.co.uk/BankProvides banking services including net profit banking.BankNetProvides on-line Banking run. A joint venture between MarketNet and Secure Trust Bank PLC.Coutts GroupInternational private banking arm of the Royal Bank of Scotland Group offering investment, fiduciary and banking products.First DirectMember HSBC Group.HalifaxFinancial institution that provides personal financial services including mortgages, long-term savings accounts, home, motor and creditor insurance, retail banking, consumer credit and share dealing.Hamilton Direct HYPERLINK http//www.hdb.co.uk/BankDivision of HFC Bank PLC which provides unsecured personal loans and credit card products in the UK.Julian Hodge HYPERLINK http//www.jhb.co.uk/BankHYPERLINK http//www.jhb.co.uk/ GroupBanking and financial services group owned by the Carlyle Trust.Legal HYPERLINK http//www.landg.com/HYPERLINK http//www.landg.com/ General Assurance Societypolicy company offering financial product s including mortgage, investment, savings and home, life and health insurance.Leeds City Credit UnionFinancial cooperative offering savings and loans products to employees of selected employers in the Leeds area.Lloyds HYPERLINK http//www.lloydstsb.com/homepage/0,1001,general,00.htmlBankFinancial institution that provides personal banking, small-business banking and corporate services.LombardFinancial institution that provides personal banking, small-business banking and corporate services.National Savings HYPERLINK http//www.nationalsavings.co.uk/HYPERLINK http//www.nationalsavings.co.uk/ InvestmentsOne of the largest savings organisation in the UK that offers savings and investment products guaranteed by the Government to personal savers and investors while contributing towards the Governments funding needs.NatWestFinancial institution that provides personal banking, small-business banking and corporate services.Northern RockBank that offers savings accounts, deposit accounts, res idential mortgages, investment mortgages and offshore savings accounts.PrudentialProvider of portfolio management services, financial advice, mortgages and personal loans.Royal HYPERLINK http//www.rbos.co.uk/BankHYPERLINK http//www.rbos.co.uk/ of ScotlandBank specializes in corporate, private and offshore banking, as well as retail banking and private motor insurance.Scotiabank GroupInternational Canadian banking group that provides retail, commercial, corporate, investment and international banking services to customers around the globe.SmileInternet bank, part of the Co-operative Bank PLC.Standard HYPERLINK http//www.standardbank.com/BankHYPERLINK http//www.standardbank.com/ LondonInternational merchant bank of the Standard Bank Group that offers specialist banking services and promotes trade, investment and business flows with an rising market focus on a worldwide basis.Standard Chartered HYPERLINK http//www.standardchartered.com/BankInternational commercial banking group provid ing consumer, corporate and institutional banking and treasury products and services with a focus on emerging markets in Asia, the sub-continent, the Middle East, Africa and Latin America.Standard Life HYPERLINK http//www.standardlifebank.com/BankSubsidiary of The Standard Life Assurance Company that provides mortgages, savings and online banking.Triodos HYPERLINK http//www.triodos.co.uk/BankUK branch of the Dutch trust bank that offers savings accounts and investments products financing projects with social and environmental benefits.Virgin Direct Personal Financial Service Ltd.Bank that offers savings accounts, deposit accounts, residential mortgages, investment mortgages and offshore savings accounts.WoolwichFinancial services organization that provides mortgages, loans, investments, banking and insurance products and services.LIST OF BANKS OF ALL THE BANKS IN ENGLAND run TILL 2010Uk major banksTHERE ARE 116 BANKS OPERATE IN UK ACCORDING TO FSA websiteThere are three types of ba nks, High Street Banks, Building Societies, andDirect Banks. High Street Banks are the main banks, such as Royal Bank ofScotland, HSBC, NatWest, Citibank, and Barclays. Building Societies such asWoolich, Abbey National, and Halifax were created for those who wanted tosave in order to deprave a house and offer pretty much the same services as theother banks. Direct Banks such as Co-op (Smile.co.uk) and First Directdont have branches, but you can bank at First Direct at the Post Officeand Co-op bank at their grocery outlets. They are telephone banks whichhave grown in popularity over the last few yearsDifferent Types of Banks* High Street Banks and Building SocietiesHigh Street banks and make societies are commercial banking businesseswhose primary market is consumer finance. These are the most common banksyou will encounter.* Investment BanksAn investment bank is a financial company, securities firm or brokeragehouse that purchases new issues of securities from private corporations andoffers them to their clients. They form a syndicate in order to sell thesesecurities to their customers and the general public.* Private BanksPrivate Banks typically provide a more personal and customised set ofservices than high street banks. Marketed to individuals with large incomesor high personal wealth, opening a private bank account usually requires avery large minimum deposit.* Online-Only BanksOnline-only banks offer the same services as traditional High Street banksor edifice societies through electronic banking and the Internet. Theynormally do not have branches for their clients to use. Besides online-onlybanks however, a number of High Street banks also offer online services.The banking system in the UK is highly concentrated with the top 10 banks having over 90% of market share.