It Has Been Argued That the Uk Banking System Is an Oligopoly

The banking industry has undergone major upheaval in recent years, largely due to the lingering recessionary environment and increased regulatory environment. Many banks have failed in the face of such tough environmental conditions. These conditions

New government regulations there have made it easier and cheaper for customers to change banks. For example, banks in Australia are no longer able to charge early exit fees such as deferred establishment fees on mortgage and personal loans due introduction of new regulation in early 2011.

In these circumstances, the cost structures are not the same as with the competitive industry and so we cannot say that the oligopolistic firm results in higher prices than if a competitive market structure were to be adopted. In fact going along the theory of the downward sloping cost curve we can come to the conclusion that it would be the other way around and consumers would

Oligopolies have been around ever since there is trade. However, it has only recently gained grounds in this age of globalisation. Never before has oligopolistic competition been so fiercely contested across so many industries.

There are various categories of banking; these include retail banking, directly dealing with small businesses and persons. Commercial and Corporate banking which offers services to medium and large businesses (Koch & MacDonald 2010). Private banking, deals with individuals, offering them one on one service. The last category is investment banking. These help clients to raise capital and often invest in financial markets. Most global banking institutions provide all these services combined. With all these institutions in existence within the same localities and offering similar services, there is a need to regulate the industry so as to protect the consumer and provide fair working environment for all banks (Du & Girma, 2011).

During the 1930s, the most prominent reason for U.S. banking regulation was to prevent bank panics and more economic disaster like those that had been experienced during the Great Depression. Later deregulation and financial innovation in industrialized countries during the 1980s eroded banks monopoly power, thus weakening their banking systems and seeming to embody the fears of post-Depression policy makers who instituted regulation in the first place. Fear that individual bank failures could spread across international borders creates pressure to harmonize bank regulation worldwide. One advocate suggests that universal banking, at least for industrialized countries with internationally active banks, would “level the playing field” by eliminating competitive advantages created by government subsidies. Although this is a valid point, one of the major driving forces behind the globalization of the banking world is the ability of banks to take

10. The characteristic of oligopolistic firms that makes them different from all other types of firms is that oligopolistic firms

Extensive research has determined that the banking industry is in an unstable state. The industry’s profits have

Infinity bank was one of the 10 largest banks in the UK with over 1800 retail branches. However, due to the change in the nature of the banking industry since the 1980’s Infinity bank had seen a consistent drop in its profitability. Deregulation of the industry had been one of the major changes that had taken place during this time which had increased the competition in the industry. Even though Infinity had followed other major banks in responding to this challenge by cutting costs, closing branches and making use of information technology, its results were far worse than others.

The banking industry is highly competitive. The financial services industry has beenaround for hundreds of years and just about everyone who needs banking servicesalready has them. Because of this, banks must attempt to lure clients away fromcompetitor banks. They do this by offering lower financing, preferred rates andinvestment services. The banking sector is in a race to see who can offer both the

Banking industry is highly competitive as there is high exit barrier. Moreover, competitors are large and quite equally balanced. Additionally, as banking industry has emerged for hundred years, just about everyone who needs banking services already has them.

Before analysing the reasons why should big banks be broken up or not, I want to argue about what a big banks in general is and the historical events that have led to them. Overall a banks is a kind of financial intermediaries which offer combinations of investment firm, commercial banks and insurance brokerage. Mindful of the last Global financial crisis, some big banks and insurance organization are considered “Too Big to Fail” (TBTF).

When only a few sellers offer a product with little regard to competition it is called an oligopoly. It is different from a monopoly because multiple corporations are involved, but the effects on the consumer are the same - bad. Although competition is usually in the best interest of the consumer, it is not always in the best interest of the corporation. If we examine the two leading soft drink producers, Coca-cola and Pepsi-cola, we see a prime example of an oligopoly (Zachary, 1999). As things are presently, each of these soft drink companies has about half of the soft drink market, and examined from a world-wide perspective that is a pretty large market. Either one of them, Coke or Pespi, could conceivably lower their prices in

If the firms have similar costs then firms are also less likely to want to initiate a price war because it would be unprofitable for firms to simultaneously cut prices as eventually prices would fall bellow total costs. If there are very high entry barriers new firms will not be attracted to enter the market which allows

Private banking industry has changed in a very basic way, driven by many key factors such as: free competition systems, modern developments in information technology (in particular, developments of the internet), and changing demographics. Private banks now operate in an environment shaped by increasing and shifting regulations, and in markets influenced by the uncontrolled situations of the world economy and geopolitical issues.