Should The Uk Government Be Enforced By Uk Law For Achieving Financial Stability Within The Current Economic Climate?

2230 Words9 Pages
In this Essay I will explore the Proposals put forward by the UK government in the 2011 “Vickers Report” as well as exploring the proposals I will then give an in depth analysis in how effective the methods put forward are; in terms of how successful they are in ensuring financial stability within the current economic climate. Furthermore I will examine how these proposals are being enforced by UK law to achieve practical outcomes, as theoretical tools do not always work as imagined in real life scenarios.

Ring Fencing.
Ring Fence means “an agreement, contract, etc, in which the use of money is restricted to a particular purpose” (Ring fence, n.d.). In terms of retail ring fencing, this is a more specific use of the term used by certain
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Due to there not being any ring fencing restrictions with the Banks that associated with Lehman brothers, many banks were therefore not insulated by the folded firm causing a massive ripple effect within the Western world Economy which allowed for such a detrimental World recession to occur.
There is a discussion with retail ring fencing and its location within a firm. How do you separate certain operations within the same firm? Because of this the commission set key principles within the proposal to help align the ring fence within a Bank.
Mandated services: services which have a high economic cost if not performed at any point in time and where the customer does not have an alternate provider. The economic cost for interruptions in these services are high because customers need these to function in an economy by having liquid assets (most likely cash) for day to day needs. Such services are provided by the Government when the private market fails and so are held in high regard. Isolation of mandatory services is used to provide authorities confidence in the retail banking system over the protection of creditors funds. “By ring fencing retail banking activities, the UK authorities will be able to protect the payments system without having to insure the high-risk products” (Banking, finance, and the role of the state, n.d.).
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