Abstract
Abstract. The paper deals with the analysis of the banking system of the UK. The UK banking sector is quite diverse, and at the same time oligopolistic. The UK exit from the EU is already having a negative impact on main banking indicators. Uncertainty in the banking sector and among the business community is, definitely, very high. This means that banks will have to work on potential and alternative outcomes, depending on their development. The impact of Brexit on banks and banking in the UK will be determined by both government-level arrangements and the response of individual firms to operating conditions changes. At the same time, the realities of the banking environment after the crisis of 2008—2009 mean that it is necessary not only to strengthen market discipline, but also to avoid excessive proliferation and diversification of commercial banks and concentration of the banking system. The post-crisis environment is characterized by a decrease in the number of commercial banks in the UK. However, the reduction in the number of banks does not prevent an increase in the value of the banking system’s assets and an improvement in their quality. Moreover, the paper explores the crisis of 2008—2009 impact on the functioning of the UK banking system (loans to monetary financial institutions, loans to non-monetary financial institutions, loans to non-monetary financial institutions, loans to the central government, deposits of monetary financial institutions, deposits of non-monetary financial institutions, central government deposits). For this purpose, the system of six vector models of autoregression has been constructed. The results of the simulations have shown that all variables have similar dynamics after the crisis shock, except for central government deposits. In the future, the leveling of the shock is observed for these variables starting from the fourth year. There is only an increase in central government deposits, starting from the second year after the shock The other variables do not respond to the crisis shock. Keywords: financial crisis, banks, bank assets, bank liabilities, problem loans, econometric modelling, VaR-models. JEL Classification C39, C51, C52, E44, E47, G01, G17, G21 Formulas: 6; fig.: 6; tabl.: 1; bibl.: 30.
Highlights
The UK banking sector is unique in its size and diversity
The post-crisis environment is characterized by a decrease in the number of commercial banks in the UK
The main goal was for large retail banks to be less likely to fail, otherwise government support could be used to save the retail bank in a wider group without directing taxpayers’ money to rescue an investment bank within one group
Summary
The UK banking sector is unique in its size and diversity. Based on long historical experience, a competitive environment that does not contradict the financial sector stability goals, has been created. Haiyan Yin (Yin, 2019) studied the impact of banks globalization on financial stability He claimed that the presence of foreign banks increases both the credit risk and the overall risk of bankruptcy of banks, as well as threatens the financial stability of the host country. This relationship depends on the regulatory and institutional framework of the host country. Lowrey (Terrell et al, 1990) analyzed the activities of Japanese banks in the United States and the United Kingdom by integrating their activities in these two markets with the regulatory environment for Japanese banks and the overall external financial condition of Japan, as well as with business opportunities in the two host countries. The regulatory environment in Japan, including interest rate restrictions and possible quantitative restrictions, has affected the performance of Japanese banks in these two foreign markets
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