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NATURE OF RETAIL BANKING IN THE
UK
The traditional business of banking involves
taking in deposits, which are then packed and on-lent as loans. Retail
banking refers to the large-volume, low-value end of this business, where
deposits are typically attracted from individuals and small business and
loans are made to the same groups. Retail banks in UK have some features
like small number of banks with extensive branches network, cash ratio is
above minimum i.e. there is more cash availability, high degree of
leverage/credit creation in terms of given out loans and also the bulk of
their business transaction is done in pound sterling. Actually it is very
difficult to distinguish between Retail and wholesale banks in the UK as
many of the banks operating in the Retail markets also operates, to some
degree, in the wholesale markets. To operate as a bank in the UK a firm must
be authorised by the financial services authority (FSA) [UP TILL June 1998,
The Bank Of England] as able to accept deposits in the UK. Once authorised,
a bank’s depositors are then protected under the UK deposits protection
scheme and the bank is require to place 0.15% of its eligible sterling
liabilities in a non- interest-bearing account at the Bank Of England.
. This has a little relevance to any prudential assessment of the bank and
is in effect a tax on banks, which is used to finance the various activities
of the Bank Of England. |
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