Critically discuss the potential of regulation to change the culture and behaviour of the UK banking industry
2014-12-04 00:00:00 +0000
In 2006 UK banks’ assets, as a percentage of GDP, had increased from 50 percent to 500percent in less than four decades (Prieg, 2011). This highlights the importance the banking sector has to UK economic growth and prosperity. However, the most recent recession, which was heavily driven by misconduct in the banking sector, also demonstrated the far reaching consequences of bad behaviour endemic to the industry. As this sector is one of the UK’s biggest economic driving forces, a well-functioning system is vital for the country's economy. Yet its efficacy has been eroded by a loss of trust born from a profound lapse in banking standards and driven by a decline in banking ethics. Scandals in the sector such as the mis- selling of PPI and the manipulation of LIBOR, both of which occurred post financial crisis, indicated that further reform to address cultural problems is needed. Mark Carney, the governor of the BoE, predicts that by 2050 UK banks’ assets could exceed nine times GDP and therefore strengthen their position in the economy (Wolf, 2013). However, in order to make this growth sustainable, the behaviour and culture in the industry must be aligned with better conduct and standards.
"Critically discuss the potential of regulation to change the culture and behaviour of the UK banking industry", Newcastle University Business School, MSc Finance and Financial Regulation Dissertation, by Sophie Thurner