THE Bank of England is clearly satisfied the steps it has taken to make banks beef up their balance sheets should keep the UK safe from the risk of a repeat of the events of 2008. A crisis in the banking system that year caused havoc in the wider economy.
The Bank’s response has involved requiring the seven lenders that are big enough to impact on the wider financial system to hold much more capital and to avoid the kind of complexities that led to problems in 2008.
It thinks the seven, including Royal Bank and Lloyds Banking Group, should be able to cope with even tougher times than seen during the last crisis and to carry on lending. Any problems that occur in the banking system should not spread into other sectors.
The fact Royal Bank of Scotland passed the latest stress tests set by Threadneedle Street points to a big increase in the financial strength of a giant that came close to collapse in 2008, with grimconsequences in Scotland.
But the Bank of England clearly expects the process of change to continue in the banking sector. Advances in financial technology will help new players enter the market posing huge challenges for incumbents.
The costs giants incur trying to retain business may outweigh any savings they achieve using new technology.
Consumers may benefit. Experts think the application of Fintech could help increase the stability of the banking system.
However following tens of thousands of redundancies in recent years, the implications for jobs in Scotland’s banking sector do not look good.
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