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Finance & Accounting
Pages 6 (1506 words)
Government Policies [Student Name] [Course Title] [Instructor Name] [Date] Essay- Government Policies The United Kingdom’s government keeps a close check on the banking sector by monitoring and preventing actions that could lead to a collapse in the banking system.
In 2008, the government of the United Kingdom designed a set of new policies so that the banks could cope up with credit crunch (a shortage of funds in the credit market for businesses and consumers) and recover from the economic downturn (Donaldson, 2011). The reasons for the banking crisis were many including low real interest rates, too much liquidity and a misjudged faith in the financial system. These three factors created an entourage that was extremely optimistic and full of opposite opinions. By not understanding the sensitive situation, some banks have only themselves to blame (Singh, 2007). The tradition within the banking sector in the UK has been one of the risks taking type that lead to its ultimate failure. Bankers made a mess of the financial reading and hence the financial situation (Singh, 2007). However, this failure was not just restricted to individual banks but also the system constructed to defend the public from risk. Banks got concerned about the value of their mortgage and also about the mortgages they had purchased from other institutes. For this reason they refused to lend to other banks in the money markets (Singh, 2007) The measures that the governments stuck during the financial crisis were public investments like debt and equity which further resulted in acquiring banks and other institutions. Government investments eased the situation of banks that went bankrupt and failed to meet its obligations. ...
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