The Structure, Conduct and Recent Performance of the Uk Banking Sector

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Before discussing the structure, conduct and recent performance of the UK banking sector, it is useful to provide an insight in the recent global financial crisis caused by the sub-prime mortgage crisis initiated in the US and underline its effects on the banking industry in the UK. It all started with the collapse of the housing bubble in the US, as borrowers were no longer able to meet their financial obligations and as consequence many of these subprime mortgages became default and the market became illiquid while banks were struggling to obtain funds which resulted into devastating losses for banks and mortgage lenders. Through securitization many of these loans were initially transferred into asset backed securities and
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In November 2009 the Financial Services Bill was introduced into Parliament. The Bill builds on the action taken so far by the Government in response to the financial crisis, and delivers wide-reaching reforms to strengthen financial regulation, support better corporate governance and provide protection to consumers. The Bill calls for a new Council for Financial Stability which is intended to consist of Treasury, Bank of England and FSA officials. It also requires major banks to hold larger capital reserves and to prepare so-called "living wills".
(Maslakovic, 2010)

The Basel Committee on Banking Supervision (BCBS) is currently working towards agreement on a comprehensive package of reforms to international capital and liquidity standards by late 2010. These new standards (‘Basel III’) should aim for materially higher levels of capital and liquidity in the banking system.
(Bank of England, 2010)

According to KPMG’s UK Banking Performance Benchmarking Survey March 2010, the domestic banking sector is divided into 2 groups:
RBS and Lloyd (significant government ownership) and the remaining three of Barclays, HSBC and Standard Chartered (privately owned).
The latter three has shown a better performance. Investment banking performance was more successful compared to retail banking especially in the first half of
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