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The United Kingdom Banking Sector - Research Proposal Example

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The author of this research proposal "The United Kingdom Banking Sector" comments on the UK’s economy that was clearly in deep recession as the industrial output declined. It is stated that the fall in industrial production was three times what had been predicted by economists…
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The United Kingdom Banking Sector
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Download file to see previous pages The sudden collapse of the Lehman Brothers also led to the situation that banks around the world had to be bailed out and the UK banks were no exception. In 2008, the British government was forced to play a major role in the British banking system to save the economy. All the banks had collected toxic debts and needed cash for survival. However, their scope and potential to raise cash grew weaker by the day just as the need for cash grew stronger (Clark, 2009).
The UK economy did not grow at all in the second quarter of 2008. In a bid to partially nationalize the banks, the UK government had to use up £500bn of taxpayers’ money (Guardian, 2008). This became necessary to restore confidence in the sector and to provide the needed fresh capital. The government wanted to reassure the market that banks such as the Royal Bank of Scotland would survive the ongoing financial crisis. Funds were made available through the Special Liquidity Scheme announced by the government as banks were not keen to lend to each other. The government had also to underwrite lending between banks.
Under the grim circumstances, while RBS had to take the government support and issue Preference Shares to the government, HSBC could keep itself from taking funds from the government. While both the banks faced heavy debts, HSBC could survive the financial crisis without financial funding support from the UK government. HSBC had some inner strength that could help it sustain itself. To understand the core strategy and the inner strengths of HSBC, the objective of the study is:
Consumers globally, and especially in the developed nations had started living beyond their means (Karsbol, 2007). Savings has dwindled and the central banks were unable to control inflation. The interest rates had been kept artificially low for too long. It was predicted by economists in 2007 that the US would be the first country to suffer from the GDP growth turning negative. The housing sector in the UK was predicted to have a downturn and overall trade would weaken.  ...Download file to see next pagesRead More
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