British Banking Sector Research Articles

Value creating mergers: British bank consolidation, 1885–1925

The British banking sector had many small banks in the mid-nineteenth century. From around 1885 until the end of World War One there was a process of increasingly larger mergers between banks. By the end of the merger wave the English and Welsh market was highly concentrated, with only five major banks. News of a merger brought a persistent rise in the share prices of both the acquiring and the target bank (roughly 1% and 7%, respectively). Non-merging banks, especially those whose local market concentration rose because of the merger, saw their stock prices rise. Our findings suggest that the process of bank consolidation increased collusive behavior among merged banks, to the likely detriment of the consumer.

Women, uniforms and brand identity in Barclays Bank

The article focuses on the British banking sector in the late twentieth century. It explores the approach of the managers of Barclays Bank, who in contrast to their competitors, decided to use female staff at the forefront of their strategy to increase business and to improve customer perceptions of the bank within its branches. In particular, we explore the decision to place women on the ‘shop floor’, to sell financial services and to dress them in a corporate uniform. Special clothing is often seen as a symbolic representation of an organization’s identity and culture. The article examines the way in which managers used female employees and their femininity as a device to attempt to build stronger customer relationships that eventually became part of a wider branding exercise.

Value Creating Mergers – British Bank Consolidation, 1885-1925

The British banking sector had many small banks in the mid-nineteenth century. From around 1885 until the end of World War One there was a process of increasingly larger mergers between banks. By the end of the merger wave the English and Welsh market was highly concentrated, with only five major banks. News of a merger brought a persistent rise in the share prices of both the acquiring and the target bank (roughly 1% and 7%, respectively). Non-merging banks, especially those whose local market concentration rose as a result of the merger, saw their stock prices rise.

Banks, births, and tipping points in the historical demography of British banking: A response to J.J. Bissell

In this paper we respond to the useful comments made by J. J. Bissell 2017, on our paper Garnett et al 2015. We use this opportunity to explain in more detail our use of agent based modelling of historical processes, and how it can raise interesting and thought provoking questions that could be answered by additional historical research. In this case, questions around the possible relationship with the size of the British banking sector and the formation of new banks. We also take the opportunity to present further data on on the possible reasons for the rise and fall in the population of British banks, and suggest that the 'tipping point' might not have been such a radical change.

ISLAMIC BANKING IN THE EUROPEAN UNION COUNTRIES

In the 1970s Islamic financial system based on religious belief emerged in some of Muslim countries. The purpose of the Islamic financial system is just like in the case of the conventional one, to facilitate the smooth flow of funds between savers and investors. However, what is distinguishable about the Islamic financial system is that it is based on principles of sharia, which is a religious law of Muslims. With the share of around 80% in total assets of Islamic financial institutions, Islamic banks play a dominant role in the Islamic financial industry. They operate in over 75 countries, not only Muslim ones, but also those, where Muslim minority live. The aim of the paper is to analyse the opportunities and challenges for development of Islamic banking in the European Union countries. The analysis should give an answer to the question whether Islamic banks can have more significant presence in the European financial market in the future, than they have today. The article consists of four parts, not counting introduction and concluding remarks. The first part of the paper is a descriptive analysis of the main principles of sharia, which have impact on operations of Islamic banks. They include: prohibition of interest (riba), avoidance of uncertainty (gharar) and prohibition of trading in illegal (haram) products. Because of the necessity to comply with those principles, the instruments offered by Islamic banks must be constructed differently than conventional ones. Islamic financial instruments are briefly described in the second part of the paper. In the third section of the article the evolution and the current state of Islamic banking in the EU countries is presented. The main focus is put on the United Kingdom, since in this country Islamic banking sector is the most developed. In the fourth part prospects for development of Islamic banking in the EU are discussed. First the factors that should contribute to the development are presented. Then challenges faced by Islamic banking industry in the EU are analysed. The key results show that Islamic banking in the European Union countries is at a very early stage of development. Even in the United Kingdom, which is the European Islamic finance leader, assets of Islamic banks account for less than 1% of total assets of British banking sector. However, there is a potential for the development Islamic banking market in the EU, which mainly lies in large and increasing population of Muslims in Europe. Moreover, after the global financial crisis, which severely affected European banking industry, there is a higher demand for ethical investments among Europeans, which could translate into higher demand for Islamic financial services. On the other hand, there are still a lot of challenges faced by the Islamic banking industry in the EU, which cannot be easily solved. They include: lack of suitable legislation in majority of EU countries, especially with regard to tax and supervision issues, problems with risk management, high costs of Islamic banking products and hostility towards Islam, and thus Islamic banking among the European society. The article uses descriptive and analytical method of analysis, based mainly on scientific literature, market reports and statistical data.DOI: http://dx.doi.org/10.5755/j01.eis.0.9.12806

Procyclicality Effects on Bank Lending Decisions: A Case Study of the British Banking Sector

We perform detail analysis and review of capital regulation under Basel II including standardised and internal rating based approaches. We consider the parameters required for both approaches. Linkages between Basel II capital regulation and Procyclicality is established and we established the fact that even though procyclicality is inherent in banking sector, Basel II capital regulation has succeeded in exacerbating it particularly during the recent financial and economic crisis. We review the effects of procyclicality on the United Kingdom Bank lending decisions particularly during the economic crisis. This is compared with bank lending decisions pre crisis and post crisis period with a view to having holistic view of the effects. Our review covers main lending classifications in the UK. These include lending to businesses, secured lending to individuals and consumer lending. We conclude that Basel II capital regulation is not the genesis of procyclicality but one of the exacerbating factors. We assent to the fact that procyclicality genesis could be traced to failure of banks to efficiently allocate resources within the economy. Relevance of Basel II in improving risk management within banking sector is also emphasised.Classification-JEL:

Regulating the Structure of the EU Banking Sector

The article analyses recent developments in the regulation of the institutional structure of banking groups in the European Union. It discusses the evolution of the universal banking model in Europe and how the global banking crisis of 2007–2009 has led to structural regulatory reforms of the European banking industry. Particular attention is paid to the British banking sector and to the United Kingdom’s ring-fence banking legislation and structural regulatory reforms. The article analyses the EU Commission’s proposed legislation to regulate the organisational structure of European banks and banking groups and compares it to structural reform legislation in Germany and France. It also analyses some of the main challenges concerning implementation of EU structural banking reforms and whether they can be effectively coordinated with existing bank supervisory and resolution practices. The article concludes by suggesting that the various limitations and prohibitions on bank trading activities in structural regulatory reforms will probably not lead to a reduction of harmful risk-taking in the financial sector, but to a shift of risk-taking away from the banking sector (where it can be monitored) to under-regulated areas of the financial system.

Complexity in history: modelling the organisational demography of the British banking sector

Using a new historical data set on the ‘population’ of British Banks for the last 200 years, we consider why, since its peak of approximately 1100 banks 1810, the population of British banks has declined to its present day population of less that 100. We hypothesise that amalgamation became an advantageous way for banks to expand, and use an agent-based simulation to test this hypothesis against the baking data. We are unable to falsify the hypothesis and show that the simulation reproduces many aspects of the real data with the minimum of assumptions.

A tipping point in 300 years of banking? A conceptual simulation of the British banking system

It has become popular to describe the behaviour of certain systems as "undergoing a tipping point". This is normally used as a description of a system that has rapidly changed from an apparently stable state to a new state with little or no warning. A wide range of complex systems can display tipping point behaviour, from climate systems to populations of people. Here we present preliminary work of using the British banking sector from 1559 to 2012 as a case study for the modelling of complex systems that show tipping point behaviour. Currently implemented in a highly abstracted form, we present a description of a conceptual model of the British banking system that is able to reproduce the general features of the changing population of British banks. However, to do so requires interventions in the system, rather than emergent properties. We discuss what future alterations to the model could be made to overcome this limitation.