The Public Duties and Social Responsibilities of Big British Banks |
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Authors: | Andy Mullineux |
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Institution: | (1) Business School, University of Birmingham, University House, Edgbaston Park Road, Birmingham, B15 2TT, UK |
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Abstract: | The implicit social compact between the big British banks and the U.K. government broke down in the 1980s. Since then, the
banks have sought to maximize shareholder value by closing less profitable branches, thereby reducing access to finance and
increasing risk taking. Post-1990, the big banks also substantially increased their dependency on wholesale funding and dramatically
reduced their liquid asset holdings, which increased their leverage and risk exposure. The U.K. government’s response to the
financial crisis was to encourage mergers between banks, increasing concentration in the industry. The government bail-outs
allowed the big banks to enjoy free insurance paid by taxpayers. The establishment of an autonomous retail banking (and insurance)
utility regulator and a system for taxing the big banks fairly is recommended. |
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