How is the UK banking sector thriving?
Whether or not the top 5 banks in the UK announce cumulative profits of over £8 billion for the first 6 months of 2010 is irrelevant really, but how is the UK banking sector apparently thriving while the rest of the UK struggles to make ends meet?
It has been a staggering turnaround for the UK banking arena over the last 12 months, after the multi-billion pound bailout from UK taxpayers effectively saved the future of many of the UK's more established banking groups. Even though it was only Lloyds Bank, Royal Bank of Scotland, Bradford and Bingley and Northern Rock which received direct investment from the government, the whole sector benefitted from various liquidity programs and overall support for UK money markets.
As a consequence banks in the UK have become very risk averse and increased a number of charges and interest rates as they look to restore their battered balance sheets. Unfortunately, with the whole sector moving in a similar direction, UK consumers and businesses have had very little in the way of alternatives to choose from, with competition fairly thin on the ground. Therefore the UK banking arena has seen profits increase dramatically over the last 12 months but are there hidden problems behind the scenes? Could we see an increase in write-offs and bad debts if the UK economy does slow or even move back into a recession?
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