Business

The UK is a leading global financial services centre and the single most internationally focused financial marketplace in the world.

The Bank of England has played a key role in maintaining the stability of the United Kingdom's financial system for 300 years and it is now a core function of most central banks. A sound and stable financial system is important in its own right and vital to the efficient conduct of monetary policy.

The financial services sector has a vital role to play in the UK economy. The sector is, of course, one of the UK’s leading employers, exporters, and contributors to GDP. The financial system provides three key services: payment services, intermediation between savers and borrowers, and insurance against risk. These services support the allocation of capital, and the production and exchange of goods and services, all of which are essential to a well-functioning economy. The financial sector in UK has shown remarkable dynamism, innovation and adaptability over the last four decades. Deregulation, new technology, globalisation and the rapid development of new financial products have characterised this sector.

I will try to examine the structure of today’s banking system. It begins with an overview of the services provided by the financial system and finally describes the role of the financial intermediaries.

The UK financial system can be broken down into financial institutions and financial markets. Financial institutions deal in Non-banking Financial intermediaries (Building societies, Insurance companies, Pension funds, Unit trusts and Investment trusts) and Banking Financial Intermediaries (Discount houses, Commercial banks, National Savings Bank and Finance houses). Financial Markets can be split up into Capital Markets – Stock Exchange and Money Markets – Primary and Secondary Market.

First, let’s have a look in Financial Institutions: Non-banking Financial intermediaries:

Building societies are mutual organisations owned by...