U.K. Banking System: Organization & Functionality Research (Research Paper Sample)

U.K. BANKING SYSTEM
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U.K. Banking System
Organization and Functionality
The past three decades marked dramatic changes in the banking system and the UK resorted to a universal banking model (Turner 2014, p. 52). To wit, the Financial Services Authority is a consolidated form of the financial regulatory agencies in the UK and an antithesis to the conventional fragmentation and decentralization of supervisory financial institutions. Universal banking is an amalgam of all financial activities such as Investment, Development, and Commercial Banking, and Insurance. The system revolves around a large bank that provides financial assistance to companies and other banks. This paper will in part, cover the Financial Services and Markets Act of 2000 in the United Kingdom in line with the political economy air surrounding its enactment to give meaning to the universality of the UK banking system (Ellinger, Lomnicka, Hare & Ellinger 2009, pp. 364-462). It will also discuss the philosophical, financial universality as an aspect of universal banking that incorporates the Bank of England (Jackson 2005, p. 1). The system has modest objectives to wit efficiency and policies push for a less oversight of finances that ease the likelihood to enact consolidation. As a universal model, t--he UK banking system is intensive in the jurisdiction of civil law in Europe and financial support.
Universal banking has two main divisions. These are monoline banking and specialized banking. Monoline banking involves one area of finance as opposed to traditional models. One example of this model is commercial banking. Commercial banks offer customers with services such as deposit reception, payment disbursements, fund investment into securities, and collection of funds from other institutions. Commercial banks can either serve the nation or a given region such as a trade organization.
Specialized banking is a system of banks that provide financial aid to heavy industries, projects, and foreign trade. Examples are industrial, foreign exchange, export-import and development banks. Others include primary mortgage institutions, microfinance banking, and non-interest banking. These banks can support agricultural activities in a country, provide a suite of products meant for a given profession, and provide automotive financing. The U.K. was the first country to come up with the universal banking system.
Insight into the matter reveals that the UK system values centralization and integration rather than decentralization and fragmentation. Also, it defends the 1990s’ Labor Party reforms as the product of banking consolidation (Gola & Roselli 2009, p. 14). Similarly, the system shifts from centuries-old accretions of bureaucracy and embraces complete immersion in an innovative approach and both functional and administrative reform. It is this change that brought about the universality of the UK banking system (Dietrich 2009, p. 54).
The UK undertook a long and semi-arduous pathway to establish the Financial Services Administration. Apparently, in 1997, several scholars wrote about a spirited Labor Government’s coming into power in spring. It became the basis for the modernization of the UK financial system (Great Britain., & Financial Services Authority (Great Britain). 2007, p. 13). However, when linked with the traditional system, the two portray different archetypical needs as represented by the scope of functional financial reform (Stowell, p. 32; Queen 2011, pp. 127-130). To the British, unification of the system into a Financial Services Authority (FSA) meant it became centralized, modernized and consolidated to draw universal appeal and ended the archaic self-regulation methodology. For this reason, their efforts climaxed when they passed the Financial Services and Markets Act of 2000 (Sweet & Maxwell 2012, p. 4). The Act consolidated all supervisory units into one organization responsible for financial universality through a legislative process, and this empowered the Bank of England as a hub for financial assistance (Harrison & Ryder 2013, p. 399).
Another explanation for the universal appeal of the functionality of the UK system is its divergence from the Anglo-American ambition into a culmination of modest, balanced objectives that fit nicely into supervisory apparatus’ consolidation. There were four statutory objectives that set the two systems miles apart (IMF Publications 2011, p. 20). These include public awareness, economies of scale, one-stop shopping, easy marketing, diversification for profitability, reduction of financial crime, consumer protection, and investor trust. For public awareness, consumer education meant an improvement in both advice and information availability and quality to customers, and general financial literacy. It achieved this through partnerships with trade associations, educational institutions, regulated business, consumer groups, and a Consumer Support Hotline. Financial crime reduction entails upholding consumer protection and market confidence. A sound universal financial body overlooks its financial institutions through the provision of systems of practices geared to consumer protection from financial crime (Ryder 2014, p. 274). The FSA integrated various financial regulators’ efforts with agencies involved in criminal law investigation, intelligence, and prosecution. These include the police and public prosecution bodies that handle criminal cases like money laundering (The Group of Thirty, 2008).
Consumer protection and resource utilization interlink with public awareness (Blair, Henderson & Great Britain 2009, p. 13). The management of universal finance firms should envisage, focus and reinforce consumer protection by ways of legislation and as a hint of their primary responsibility. FSA introduced singularity of the compensation and financial ombudsman schemes, and these offer a range of mechanisms for different markets and types of customers worldwide. The simplicity and ease of access to FSA’s identification, measurement and control of the consumer’s and firms risks, complaints’ handling and redress systems plays a large part in consumer confidence (Bank of England., Great Britain., & Financial Services Authority 2008, p. 132).
Investor trust or market confidence relates to the protection of reasonable expectations of the financial system and financial stability of the system. The FSA maintains market trust in a bid to spark the provision of consumer-related market incentives that foster trade in financial markets and the use of various services offered by financial institutions (Vos & Everson 2009, p. 80). The body achieved market confidence through the imposition of two statutes. These are an explanation of the level of trust in the financial system of the UK financial and material damage prevention as a result of the collapse of financial, firm, or market infrastructure. The later is a new dimension that states in explicit terms the scope of achievement or lack of it, of the body and affiliate banking institutions.
It is imperative to note that universality involves more than regulatory structure and political economy reform instead of the archetypical traditional nemesis. Mythology aside, the practicality of a system in the form of service delivery is the underlying factor of consumer confidence and acceptance. The UK banking system serves such a notion with its vast array of customer-specific services (Akrani, 2011). The U.K. financial system, through the Bank of England, is inherent in the provision of the three crucial services that have global appeal. These are risk insurance, borrower-savers intermediation, and payment services. These services entail the essentials of functionality in a Commonwealth economy that provides inclusivity in production and exchange of services and products, and capital allocation support. While these fundamental features or services portray timelessness, the derogatory character of the provisioning system and methodology changes as much as both the regulation and economy develop.
The transfer of risk and insurance offers protection to households and companies alike against fraudulent mechanizations from target-oriented money launderers and unforeseen occurrences. Businesses and individual households face the likelihood of liquidity loss due to natural disasters, human greed and unpredictable circumstances (Great Britain & Great Britain 2009, p. 134). The banks allow for the set up of deposit accounts for these two parties (Devenney & Kenny 2012, p. 167). It also has the provision for derivatives, financial security, and other insurance contracts or policies that aid in facilitating the dispersion of other financial risks within an economy.
Intermediation between borrowers and savers is a source of finance for the parties involved in a commercial transaction (Barth, Gan & Nolle n.d., p. 16). To wit, the banks pool mutual funds, household savings, and pension funds into conventional deposit accounts. The banks then transform these accounts into sources of government, company, and family funding (Accenture, 2012, p. 4). Lastly, universal appeal involves services that pertain to payment, settlement, and transaction. The banking system achieves this milestone through efficiency services that bridge the gap between companies and households. These include support services and custody and deposit accounts.
In a nutshell, the significant change in the financial system of the UK over the recent decade is all conclusive (Structure of the UK Financial System 2006, p. 34). Financial deregulation and drivers of the natural economy led to the enactment of the Financial Services and Markets Act of 2000. These preceded the legislative genesis of the F...