Abstract:
Banking in the United Kingdom can be considered to have started in the Kingdom of England in the 17th century. The first activity in what later came to be known as banking was by goldsmiths who, after the dissolution of English monasteries by Henry VIII, began to accumulate significant stocks of gold. The Bank of England has a longstanding interest in the structure of the financial system. System structure can affect financial stability through influencing the cost and availability of the financial services on which households and businesses depend. The country's banking sector consists of more than 340 commercial banks, with the Bank of England, which is the economy's central bank, at the apex. Since the 1970s, the U.K government has implemented a number of banking sector reforms - in order to safeguard and improve the banking sector. By any standard, the U.K. currently has one of the most developed banking systems in world. The country has enjoyed a substantial bank-based financial sector development over the years, and its institutional framework has also grown stronger. However, like any other financial system, the U.K. banking system still faces wide-ranging challenges, such as less than adequate disclosure standards, contagion risk from the euro zone, squeezed interest margin and uncertainties caused by changes in regulatory regimes.
This article tracks the history evolution of a core component of the banking 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 globalization and financial innovation.
