Evolution of the UK Banking System

12 Pages Posted: 26 Dec 2010 Last revised: 17 Jan 2015

Date Written: December 13, 2010

Abstract

The financial system provides three key services: payment services, intermediation between savers and borrowers, and insurance against risk. These services support the allocation of capital, and the production and exchange of goods and services, all of which are essential to a well-functioning economy. While the basic financial services are relatively timeless, the characteristics of the system providing them change continuously, in response to both economic and regulatory developments. This article tracks the evolution of a core component of the financial system in the United Kingdom, the banking sector, describing how technology has transformed the economics of banking, and how deregulation in the 1970s and 1980s freed banks to take advantage of new opportunities through globalisation and financial innovation. The result has been the emergence of large, functionally and geographically diverse banking groups. Post-crisis, public-policy attention has been focused on the costs of a banking sector dominated by large and complex institutions that are seen as too important to fail.

Suggested Citation

Davies, Richard and Richardson, Peter and Katinaite, Vaiva and Manning, Mark J., Evolution of the UK Banking System (December 13, 2010). Bank of England Quarterly Bulletin 2010 Q4, Available at SSRN: https://ssrn.com/abstract=1730160

Richard Davies (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Peter Richardson

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Vaiva Katinaite

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Mark J. Manning

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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