The UK Banking System Essay Example | Topics and Well Written Essays - 1750 words

The UK intrusting dodge - Essay ExampleMany of these do not exhaust a physical presence in the UK but can accept deposits on a cross-border basis. Assets and liabilities of the UK banking firmament reached 4,165bn at the end of 2003, nearly trey times the 1993 total. Although their share decreased somewhat during the past decade, foreign banks still held over half of UK banking sector assets in 2003. European banks accounted for nearly a half of this, followed by US and Japanese banks (Delta Quest Network, 2005).Bank of England is responsible for maintaining overall stability of the pecuniary system as a whole. Since its responsibilities for supervising individual banks were transferred to the FSA, the financial stability role of the Bank has been to focus on identifying and limiting systemic financial risk. This involves close observe of the financial system infrastructure, infracticularly payments systems. The Bank also monitors economic and financial mart developments, as part of an overview of the system as a whole.Now-a-days, the main focus of most of the banks is on risk management in the first place on reputational, regulatory, operational and st straygic risk, as well as the more traditional credit and market dimensions of risk. There are a number of factors responsible for this increased focus. The major of them are globalization, the relatively fortunate economic environment - such that the UK banking sector has made record profits again this year, it remains extremely capitalised and asset quality remains strong the reputational impact that high profile regulatory issues are seen to have had - on both the retail and wholesale side - and the shift in the regulators focus towards governance and soften issues and the unprecedented volume of regulatory change (Hale, 2004).Both the UK and world economy are continuously gaining proceeds from a sustained period of consistent growth. The banks have benefited from the economic health, producing a strong financial exertion over the last few years and in the first half of 2004. They remain well -capitalized and on that point are no signs of any serious deterioration in asset quality. Yet, the risk of macroeconomic observatory continues to exist.The move to slightly high interest rates is the first aspect to be considered. To state the obvious, higher interest rates will increase the cost and reduce the affordability of both the stock of consumer lending and stark naked loans. Although the monetary authorities both in the UK and abroad are managing the turn in the interest rate cycle with great care, regulators are required to acknowledge the risk that the shift to a more objurgate rate of growth in consumer borrowing may not be universally smooth (Hale, 2004). Secondly, the chasten in lending margins. A long period of strong personal sector credit quality, bring together with strong competition for lending business, has helped squeeze margins to historically low level s. The effects of this on the bottom stress have been disguised by strong volume growth. There are two downside risks for the banking sector in the UK as felt by the FSA. The first is that, the period of strong volume growth may be coming to an end. The second is that a downturn could expose banks as having under- priced risk through the cycle.The Northern quaver CrisisNorthern Rock is