Ring-Fencing and Total Separation Approaches to Banking Regulation The banking industry has over the years evolved from simple to large and complex organization. They have grown from one street building into having multiple branches some of which are international. Their clients range from individual and institutions to governments and other banks. Banks do not manufacture physical things. Their work is simply services for money (Koch & MacDonald 2010). Such services include storing, lending and
a combination of measures on the structure and the ability to absorb losses of the banks. It is suggested that some degree of structural separation between investment banking and retail banking is necessary, not only because it can resolve banks in trouble easier, but also avoiding the banking services affecting by international shocks which is beyond the control of the local authorities. On the other hand, banks with a greater loss absorbing capacity will definitely be helpful in strengthening
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
HSBC is concerning the new headquarters location because of two huge reasons: the bank ring-fencing rules and the rising tax levy launched by UK government (CityA.M., 2015). The ring-fencing rules means to separate deposit-holding retail banking from investing bank, which rise the capital needed when no capital flow freely between these two kinds of bank (CityA.M., 2015). The 11 criteria are used by HSBC to estimate which city to stay (Reuters, 2015). “Economic importance and future growth”
favourable is the ring fencing structure. Rather than including ring fencing contractual terms like in the structure of JV, the SPV structure is to insulate the project sponsors from the risk of the project. The default risk in the project is separated from the corporate risk of the sponsor engaging in the project and the debtor-creditor relationship is between the banks and the SPV. This means that the sponsor in the SPV can limit its exposure to individual equity investment in the SPV. The banks have no
was precipitated by systematic striping away of the New Deal era policies of bank regulation. Most notable of these deregulatory acts was that of the Gramm-Leach-Bliley Act of 1999. This bill repealed the legislation which held commercial banks and investment banks separate. As the beginning of the 21 century approached many bankers clamored for an end to the policy of the “firewall” between Investment and commercial banks. Gramm-Leach-Bliley Act of 1999, sought to create more competition in the financial
• Private Banking HSBC achieved a huge success in this field through comprehensive wealth planning solutions. Euromoney Private Banking and Wealth Management survey awarded the bank internationally as the best Private Banking Company over the globe. Client’s personal affairs have assessed and managed by wealth planners who are the specialists. • Capital During the financial crisis of 2007-2010 HSBC demonstrated strong capital structure which assist in surviving the bankruptcy. It was benefited from
Back Office Outsourcing – An essential driver of growth for banks? The banking sector is undergoing a major phase of change – embracing outsourcing of services more than ever before in a bid to streamline processes and maximise efficiencies. The business process outsourcing (BPO) sector is growing at an accelerating pace. More and more back office outsourcing is being applied across numerous industries. Specifically, the recession led to the start-up of many different solution providers as well
ethics to close the increasingly growing gap between retail bankers and their clients. The global financial crisis epitomises the significance that trust and confidence plays in financial markets. Although the financial crisis was over five years ago banks are still at the bottom of the trust league table, this is evidence supporting that the loss of trust is not an issue that can be rectified with a reform or new policy. (Reference 1)Radical changes in banking culture are necessary to start to rebuild
Introduction The financial crisis of 2007 arose when banks, such as HSBC announced losses due to mortgages in the US housing market (BBC News - Global recession timeline, 2016). The crisis had a global impact as financial systems are interconnected. This crisis had huge impacts in many countries. In fact, in 2009, the UK Chancellor, Alistair Darling announced that the UK had a record debt of £175 billion (BBC NEWS | UK | UK Politics | Tax rise as UK debt hits record, 2016). This report will analyze