UK financial system needs overhaul, says thinktank
The UK’s financial system is in need of an urgent overhaul, thinktank The New Economics Foundation said in a report on Tuesday.
It said that the UK’s resilience declined dramatically in the 2000s to levels far below those of other leading industrial economies, with the UK’s financial system fifth out of the G7 bloc of leading industrial countries, behind Japan, Germany, France, Italy and Canada.
The NEF said the UK is better placed than it was, but not enough has been done to protect the economy from another shock. “Despite some marginal improvements since the crisis of 2008, without major structural changes our financial system remains at risk of future crisis,” said the NEF.
“Although the UK’s financial system resilience has improved slightly since the financial crisis, it remains the worst in terms of diversity, interconnectedness, financial system size, asset composition and complexity, and transparency. This has worrying implications for the UK’s economic stability,” it added.
The NEF suggested that a rise in peer-to-peer lending could significantly improve system resilience, but said this depends on how the industry evolves. Peer-to-peer lending is wen savers lend money directly to individual or small businesses.
The NEF also suggested changes such as a full separation of high street banks from investment banks and more competition in the banking sector.