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Separation of Retail and Investment Banking Operations - Essay Example
Finance & Accounting
Pages 6 (1506 words)
Topic: Separation of Retail and Investment Banking Operations Institution Affiliation: Date: Introduction The banking sector is a crucial component of the economy. Provision of financial and consumption of financial services is essential in pursuit of economic and social growth and development…
The need to separate the two operations is the central focus of this paper, presenting arguments for and against the move in detail. Arguments in support of separation of retail and investment banking operations Financial crisis is not a new phenomenon for the banking sector in U.K and beyond. From time to time, economic hardships that have resulted in financial crisis have been observed around the world. Year 2008 global financial crisis adversely affected financial systems in various economies. This necessitated the need to manage risks in the financial sector, which is primarily dominated by banks. Following this and other affecting factors, regulation, control and reforming the banking sector is essential. Separation of retail and investment banking operations is a positive move to take in the context of the above pursuit. That is, regulation, control and reforming financial services providers. Separating retail and investment banks would mean that the each of the two becomes a standalone legal entity. It is important to note that retail banks handle short term and long term payments, accept deposits and offer credit services by lending funds (De Jonghe, 2010, p. 387). On the other hand, investment banks primarily deal with financial instruments. In this regard, they are also referred to as casino banks. ...
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