Essay on The Financial Crisis and UK Bank Scandals

The Financial Crisis and UK Bank Scandals In September 2007 the UK banking industry began exhibiting symptoms of the financial crisis that started in America in 2006. Northern Rock was in trouble and had to ask the Bank of England for help. When news of this got out customers started queuing around the block to withdraw their money. In 2008 Northern Rock was nationalised, and in 2012 it was bought by Virgin Money. Today the banking industry can be seen to be on the road to recovery. But on that road there have been potholes of controversy. Im thinking Libor, excessive bonuses, payment protection mis-selling and foreign exchange manipulation, to name a few. But before we look at those in a bit more detail, lets quickly recap on the†¦show more content†¦The sellers of these swaps then covered themselves against the risk of the swap theyd just sold by buying yet another credit default swap. It was getting complex. When mortgage defaults caused a drop in the value of collateralized mortgage obligations, the credit default swaps had to pay up, and banks started seeing significant losses. The reduced liquidity led to a freeze in trading of CMOs, then the banks stopped lending to each other altogether. Enter Northern Rock, who needed this short term lending to maintain business as usual. We know what happened to them subsequently. Banks all over the world were suffering losses by this stage, and headlines were made when US bank Bear Stearns had to go to the Federal Reserve for funding. They were taken over by JP Morgan shortly afterwards. Then the floodgates opened, with the bankruptcy of Lehman Brothers in 2008 prompting a consolidation of banks (Lloyds bought HBOS, Bank of America bought Merrill Lynch). The whole financial system was under such a strain at this point that government intervention was required. The UK government propped up Lloyds/HBOS and RBS with around  £37 billion of taxpayers money. Interest rates were cut from 5% in September 2008, and by March 2009 they were at 0.5%. At the same time guarantees were given to savers that their deposits up to  £50,000 would be covered (now  £85,000). In 2009 further government support was needed, and according to TheShow MoreRelatedThe Impact Of Financial Services On The Uk Economy1814 Words   |  8 PagesThe financial services sector has a vital role to play in the UK economy. The 2007-2008 financial meltdown, also termed as the Global Financial crisis is considered by many as the worst financial crisis since the Great Depression of the 1930s. The crisis which began with a run on a major high-street bank s, Bear Stearns and Lehman Brothers and resulted in part-nationalisation of two of the largest banks in the world, and left the UK economy vulnerable was purportedly caused by the failure of financialRead MoreTimeline of Uk Re gulatory Events Essay1045 Words   |  5 PagesFigure 9: Timeline of UK regulatory events 1980s Introduction of the modern regulatory system; self-regulation among asset managers, statutory oversight of banks and insurers. The Financial Services Act 1986 (FSA 1986) marks a step change in the nature and extent of UK investment business regulation. April 1988 sees the introduction of a regulatory system that has investor protection as its main aim. The system is based on ï ¬ ve selfregulating organisations (SROs);48 membership organisations taskedRead MoreThe Financial Crisis Of The Fiscal Crisis1661 Words   |  7 Pages The 2007-2008 financial crisis is seen as one of the biggest failure of risk management. This is the reason why it has been described it as a credit tsunami. The aim here is to look at the state in which the financial market is at the moment after being hit by the 2007-2008 financial Crisis. The first part of this report introduces some key issues that have affected the confidence in the banking sector and its importance in the banking sector. The second part will provide explanations on how toRead MoreImportant Characteristics Of An Individual s Behavior1580 Words   |  7 Pagesbusinesses or global banks follow ethical guidelines. This would allow society to trust in their decision making. The word society covers a big group of people, which include investors, clients, and other financial industries (McKay, Nitsch Peters). Having ethical guidelines would help a business or a bank to growth in a healthy way for a long term. Moreover, a recent ethical scandal that took place in London but had a huge influence in the United States was the JP Morgan London Whale Scandal. This incidentRead MoreFinancial Governance And Corporate Governance1746 Words   |  7 Pagesrole that corporate governance plays in successful businesses and in social welfare. The RBS scandal is a perfect illustration of weak corporate governance and failure of checks and balances by the required institutions which inflates from the UK government to Auditing companies. The main objective of such report is to directly address the RBS corporate governance scandal which affected a large portion of the UK economy in 2008. By doing so the writer applies relevant corporate governance theories, asRead MoreAn Interview With The Banking System Essay1408 Words   |  6 PagesAfter speaking to several of my former colleague at Chase, they mentioned The Banking System have made changes and is taking the necessary steps to improve their appearance . Many have moved to others Banks due to the stress. Michael Bane (2016, September 28), said he left and went to another bank due to the sales pressure and the constant reminder that he was under performing. In an interview with Britt, L (2016, September 28), J.P. Morgan Chase focus is now on customer service and numbers. MyRead MoreThe Financial Crisis Of 2007 And 20091594 Words   |  7 PagesPrior to the crisis in 1907, individual banks such as JP Morgan and the reserve banks of New York were considered full service financial institutions. In the year 1913, the Federal Reserve System was created by congress to help stabilize the financial market by acting as the lender of last resort to the banking institutions (federalreserve.gov). Nonetheless the great depression still hit the economy between 1929 and 1933 which led to the stock market crash and market share value decrease by 80% (historyRead MoreOligopoly of Banks1566 Words   |  7 Pagesï » ¿BRITISH BANKS: CRACKING THE O LIGOPOLY Student: Aruni Dileepa Wijeweera - 16639300 Student: Elie Gharib - 16443365 Student: Ying Sheng - 17903022 Lecturer: Dr. Neil Perry Economics 200425 Due Date: 18th November 2013 United Kingdom (UK) banking industry started in 1694 with the establishment of Bank of England, with the main purpose of funding the war against France. Throughout the years and with the expansion of the banking industry, many private banks invaded theRead MoreA Report on â€Å"Accounting† and â€Å"Finance† and Why Are They Considered Important for Business.1794 Words   |  8 Pages104-109). Users of accounting information There are a lot of users of accounting information. Alexander and Nobes (2010, p.4) gives us a lot of examples of people who might use accounting information. For instance, managers may need to know the financial status of a business; owners of the business. They need to know whether their business is profitable; creditors, they need this kind of information to assure themselves that there is no risk of not being paid what they are due. Other users of accountingRead MorePestle Raport Lloyds Banking Group3636 Words   |  15 PagesLloyds Banking Group PLC is a financial institution that was formed after the acquisition of HBOS in 2009. Lloyds PLC are one of the largest banks in the UK by assets, containing over 100.000 employees in total. It operates in several countries and provides products and services such as retail commercial banking, wholesale banking and bancassurance. Their headquarters is stationed in London. After the acquisition of HBOS, Lloyds became the leading retail ba nk in the UK with core brands being Lloyds