The University of Southampton
University of Southampton Institutional Repository

Towards stable and competitive banking in the UK - evidence for the Independent Commission on Banking (ICB)

Towards stable and competitive banking in the UK - evidence for the Independent Commission on Banking (ICB)
Towards stable and competitive banking in the UK - evidence for the Independent Commission on Banking (ICB)
In order to achieve all the goals aimed at by the ICB, two reforms are necessary that are of modest nature and that allow banks to continue to function largely as they do currently (specifically, they allow banks to continue their creation of credit).

These proposals are to

- impose direct regulation of the quantity and quality of bank credit

- change the structure of the banking sector in the UK to make it more similar to the
German banking sector.

The regulation of credit would take the form of restricting bank credit creation for transactions that are unsustainable – namely transactions that do not contribute to GDP, i.e. the financial transactions. Furthermore, the government (or central bank) should control the quantity of credit that banks are allowed to create, while closely monitoring the allocation (the use credit is put to). The ‘guidance’ of the quantity and allocation of credit towards productive purposes has been the single most important factor in the success of the ‘East Asian miracle’ economies Japan, China, Korea and Taiwan.

The reform of the banking sector would introduce a large, but currently virtually non-existing element of locally-owned banks. These would take the two competing forms of local cityowned banks and local credit unions (cooperative banks). In Germany, they account for about 70% of the banking sector, while in the UK currently for less than 1%. It is argued that this banking structure has been the single most important structural reason for the performance of the German economy, as well as other countries (such as Japan).

The proposed reforms would achieve the goals sought by the ICB, virtually without the need for any other reforms. The costs and disruption of introducing the reforms would be minimal, while the benefits would be significant. They would include the end of the boom-bust cycles and banking crises, while achieving a more stable banking sector and sustainable economic performance.
3/1-1-
University of Southampton
Werner, Richard
dc217378-eb19-4592-9be4-ab5f847b74a1
Werner, Richard
dc217378-eb19-4592-9be4-ab5f847b74a1

Werner, Richard (2010) Towards stable and competitive banking in the UK - evidence for the Independent Commission on Banking (ICB) (CBFSD Policy Discussion Paper, 3/1-1-) Southampton, GB. University of Southampton 23pp.

Record type: Monograph (Discussion Paper)

Abstract

In order to achieve all the goals aimed at by the ICB, two reforms are necessary that are of modest nature and that allow banks to continue to function largely as they do currently (specifically, they allow banks to continue their creation of credit).

These proposals are to

- impose direct regulation of the quantity and quality of bank credit

- change the structure of the banking sector in the UK to make it more similar to the
German banking sector.

The regulation of credit would take the form of restricting bank credit creation for transactions that are unsustainable – namely transactions that do not contribute to GDP, i.e. the financial transactions. Furthermore, the government (or central bank) should control the quantity of credit that banks are allowed to create, while closely monitoring the allocation (the use credit is put to). The ‘guidance’ of the quantity and allocation of credit towards productive purposes has been the single most important factor in the success of the ‘East Asian miracle’ economies Japan, China, Korea and Taiwan.

The reform of the banking sector would introduce a large, but currently virtually non-existing element of locally-owned banks. These would take the two competing forms of local cityowned banks and local credit unions (cooperative banks). In Germany, they account for about 70% of the banking sector, while in the UK currently for less than 1%. It is argued that this banking structure has been the single most important structural reason for the performance of the German economy, as well as other countries (such as Japan).

The proposed reforms would achieve the goals sought by the ICB, virtually without the need for any other reforms. The costs and disruption of introducing the reforms would be minimal, while the benefits would be significant. They would include the end of the boom-bust cycles and banking crises, while achieving a more stable banking sector and sustainable economic performance.

Text
Werner_Soton_Towards_Stable_Banking_201011.pdf - Other
Download (451kB)

More information

Published date: 15 November 2010
Organisations: Centre for Digital, Interactive & Data Driven Marketing

Identifiers

Local EPrints ID: 342277
URI: http://eprints.soton.ac.uk/id/eprint/342277
PURE UUID: a39aa5a4-ef98-4fe8-a75e-872d9e3b8375

Catalogue record

Date deposited: 20 Aug 2012 11:11
Last modified: 14 Mar 2024 11:48

Export record

Contributors

Author: Richard Werner

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×