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This ruling by the OFT had been taken by many customers to extend to their personal bank accounts and subsequently the UK small claims court system was flooded with cases of customers reclaiming these ‘illegal’ penalties. It was reported<ref>{{cite web | title = --"The Scotsman, Bank Charges | url = http://business.scotsman.com/index.cfm?id=1843812006 | access-date = 2006-08-27 }}</ref> that nearly 1.8 million template letters to take the banks to court had been downloaded from the website [[MoneySavingExpert.com]].<ref>{{cite web|title=Bank Charges: Reclaim your money |url=http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1141050760,24632, |access-date=2006-08-27 |url-status=dead |archive-url=https://web.archive.org/web/20060825113757/http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1141050760%2C24632%2C |archive-date=2006-08-25 }}</ref> In October 2009, the [[Supreme Court of the United Kingdom|Supreme Court]] overturned previous rulings that allowed the OFT to investigate overdraft charges, bringing to an end such claims.<ref>{{cite news| url=http://news.bbc.co.uk/1/hi/8376906.stm | work=BBC News | title=Banks win on overdraft fees case | date=25 November 2009}}</ref> Although initially the OFT said it would look at other ways to pursue the matter, in November that year it decided not to continue with further action.<ref>{{cite news| url=https://www.theguardian.com/money/2009/dec/22/bank-charges-oft-drops-fight | location=London | work=The Guardian | first1=Graeme | last1=Wearden | first2=Patrick | last2=Collinson | title=OFT gives up unfair bank charges fight | date=22 December 2009}}</ref> | This ruling by the OFT had been taken by many customers to extend to their personal bank accounts and subsequently the UK small claims court system was flooded with cases of customers reclaiming these ‘illegal’ penalties. It was reported<ref>{{cite web | title = --"The Scotsman, Bank Charges | url = http://business.scotsman.com/index.cfm?id=1843812006 | access-date = 2006-08-27 }}</ref> that nearly 1.8 million template letters to take the banks to court had been downloaded from the website [[MoneySavingExpert.com]].<ref>{{cite web|title=Bank Charges: Reclaim your money |url=http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1141050760,24632, |access-date=2006-08-27 |url-status=dead |archive-url=https://web.archive.org/web/20060825113757/http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1141050760%2C24632%2C |archive-date=2006-08-25 }}</ref> In October 2009, the [[Supreme Court of the United Kingdom|Supreme Court]] overturned previous rulings that allowed the OFT to investigate overdraft charges, bringing to an end such claims.<ref>{{cite news| url=http://news.bbc.co.uk/1/hi/8376906.stm | work=BBC News | title=Banks win on overdraft fees case | date=25 November 2009}}</ref> Although initially the OFT said it would look at other ways to pursue the matter, in November that year it decided not to continue with further action.<ref>{{cite news| url=https://www.theguardian.com/money/2009/dec/22/bank-charges-oft-drops-fight | location=London | work=The Guardian | first1=Graeme | last1=Wearden | first2=Patrick | last2=Collinson | title=OFT gives up unfair bank charges fight | date=22 December 2009}}</ref> | ||
Heads of major British banks met with the Governor of the [[Bank of England]] following days of market pressure on lenders' stocks. The [[Bank of England]] said after the 20 March 2008-meeting that participants had "agreed to continue their close dialogue with the objective of restoring more orderly market conditions." | Heads of major British banks met with the Governor of the [[Bank of England]] following days of market pressure on lenders' stocks. The [[Bank of England]] said after the 20 March 2008-meeting that participants had "agreed to continue their close dialogue with the objective of restoring more orderly market conditions."<ref>{{cite news |url=http://edition.cnn.com/2008/BUSINESS/03/20/uk.banks.ap/index.html |website=CNN}}</ref> | ||
As of 11 October 2008, the British banks have short-term liabilities equal to 156% of [[GDP]] or 368% of the British national debt, while the average leverage ratio (assets/net worth) is 24 to 1.<ref>{{cite news| url=https://www.nytimes.com/2008/10/11/business/worldbusiness/11charts.html?_r=1&partner=rssnyt&emc=rss&referer=sphere_related_content&referer=sphere_related_content&oref=slogin | work=The New York Times | title=The World's Banks Could Prove Too Big to Fail — or to Rescue | first=Floyd | last=Norris | date=11 October 2008 | access-date=26 April 2010}}</ref> | As of 11 October 2008, the British banks have short-term liabilities equal to 156% of [[GDP]] or 368% of the British national debt, while the average leverage ratio (assets/net worth) is 24 to 1.<ref>{{cite news| url=https://www.nytimes.com/2008/10/11/business/worldbusiness/11charts.html?_r=1&partner=rssnyt&emc=rss&referer=sphere_related_content&referer=sphere_related_content&oref=slogin | work=The New York Times | title=The World's Banks Could Prove Too Big to Fail — or to Rescue | first=Floyd | last=Norris | date=11 October 2008 | access-date=26 April 2010}}</ref> | ||
Banking in the United Kingdom can be considered to have started in theKingdom of England in the 17th century. The first activity in what later came to be known asbanking was bygoldsmiths who, after the dissolution of Englishmonasteries byHenry VIII, began to accumulate significant stocks of gold.[1]
Many goldsmiths were associated withthe Crown but, following seizure of gold held at theRoyal Mint in theTower of London byCharles I, they extended their services to gentry and aristocracy as the Royal Mint was no longer considered a safe place to keep gold. Goldsmiths came to be known as ‘keepers of running cash’ and they accepted gold in exchange for a receipt as well as accepting written instructions to pay back, even to third parties. This instruction was the forerunner to the modernbanknote orcheque. Around 1650, a cloth merchant,Thomas Smith opened the first provincial bank inNottingham. During 1694 theBank of England was founded.[2]
The Governor and Company of theBank of Scotland was established by anact of the Parliament of Scotland on 17 July 1695, the "Act for erecting a Bank in Scotland", opening for business in February 1696. Although established soon after theBank of England, the Bank of Scotland was a very different institution. Where the Bank of England was established specifically to finance defence spending by theEnglish government, the Bank of Scotland was established by theScottish government to supportScottish business, and was prohibited from lending to the government without parliamentary approval.[3] The founding act granted the bank amonopoly on publicbanking in Scotland for 21 years, permitted the bank's directors to raise a nominal capital of £1,200,000pounds Scots (£100,000pounds Sterling), gave the proprietors (shareholders)limited liability, and in the final clause (repealed only in 1920) made all foreign-born proprietors naturalised Scotsmen "to all Intents and Purposes whatsoever".John Holland, anEnglishman, was one of the bank's founders. Its first chief accountant wasGeorge Watson.
During this period, services offered by banks increased. Clearing facilities, security investments andoverdraft protections were introduced. Anact of Parliament[which?] in 1708 restricted banks with more than six partners from issuing bank notes. This had the effect of keeping private banks as small partnerships.Joint stock investment companies were already well established, but joint stock banks did not become well established until the following century.
TheIndustrial Revolution and growing international trade increased the number of banks, especially in London. These new "merchant banks" facilitated trade growth, profiting from England's emerging dominance in seaborne shipping. Two immigrant families,Rothschild andBaring, established merchant banking firms in London in the late 18th century and came to dominate world banking in the next century.
Many merchant banks were also established outside London, especially in growing industrial and port cities such asManchester,Birmingham,Newcastle andLiverpool. By 1784, there were more than 100 provincial banks. The industrialist turned banker such asFox, Fowler and Company could assist his own industry since he not only provided a local means of payment, but also accepted deposits.
A great impetus to country banking came in 1790 when, with England threatened by war, the Bank of England suspended cash payments. A handful of Frenchmen landed inPembrokeshire, causing a panic. Shortly after this incident, Parliament authorised theBank of England and country bankers to issue notes of low denomination.
On 23 October 1826 a new joint stock bank, Lancaster Banking Company, was formed. However earlier that year the Bristol Old bank had converted from a private to a joint stock bank, making it the first joint stock bank. This was quickly followed by other institutions such as the Manchester & Liverpool District Banking Company and theNational Provincial Bank. The National Provincial was the first bank to be considered a truly national bank with twenty branches across England and Wales.
In 1844 the government introduced theBank Charter Act 1844 (7 & 8 Vict. c. 32) to regulate the issuing of bank notes. Two banking collapses, one in 1866 and another in 1878 caused significant reputation damage but in consequence record keeping and accounting improved. The resulting new organisations became huge bureaucracies with a board of directors, general manager, secretary and an army of accounting clerks.
In 1896 twenty smaller private banks formed a new joint-stock bank. The leading partners of the new bank, which was namedBarclay and Company, were already connected by a web of family, business and religious relationships. The company became known as the Quaker Bank, because this was the family tradition of the founding families. This bank eventually becameBarclays PLC.
Between the wars, there was a decline to match the general depression of the time. But the banks fought back by taking action to recruit less wealthy customers and by introducing small saving schemes.
It would take until 1950 for real recovery where there was a huge increase in provincial branch offices and the emergence of the high street bank. Relaxation of some controls over mergers and acquisitions led toconsolidation in the 1960s in which theBig Five became theBig Four, along with the takeover of several regional banks (Martins,District Bank,National Bank,Glyn Mills andWilliam Deacons). At the same time the government launched a new banking service, theNational Girobank. TheBanking Act 1976 increased the supervisory role of theBank of England.
Introduction of computing, credit cards and many new services continued to drive the expansion of banks and as deregulation was introduced competitiveness increased. Banks improved services, refurbished antiquated premises and brought in further technology such asATM.
Currently most banks in the United Kingdom offer very similar services, distinguished only by differing interest rates.
In 2006, theOffice of Fair Trading found that the banks were exploiting penaltybank charges on credit cards and has suggested that banks restrict such penalty to a maximum of £12. Penalty charges orLiquidated damages are illegal in UK contract law unless they represent the real cost of a breach of contract incurred through an unauthorised overdraft level orbounced cheque.
This ruling by the OFT had been taken by many customers to extend to their personal bank accounts and subsequently the UK small claims court system was flooded with cases of customers reclaiming these ‘illegal’ penalties. It was reported[4] that nearly 1.8 million template letters to take the banks to court had been downloaded from the websiteMoneySavingExpert.com.[5] In October 2009, theSupreme Court overturned previous rulings that allowed the OFT to investigate overdraft charges, bringing to an end such claims.[6] Although initially the OFT said it would look at other ways to pursue the matter, in November that year it decided not to continue with further action.[7]
Heads of major British banks met with the Governor of theBank of England following days of market pressure on lenders' stocks. TheBank of England said after the 20 March 2008-meeting that participants had "agreed to continue their close dialogue with the objective of restoring more orderly market conditions."[8]
As of 11 October 2008, the British banks have short-term liabilities equal to 156% ofGDP or 368% of the British national debt, while the average leverage ratio (assets/net worth) is 24 to 1.[9]
TheFinancial Services (Banking Reform) Act 2013 calls for a paradigmatic shift toward the principle adopted by the US ofrisk averse strategies. This manifests itself in the form of "ring-fencing" retail banking to protect consumers and creating requirements for certain amounts of capital to be retained to act as a buffer against market instability. This reform is set to support the strengthening economy and is a response to theFinancial crisis of 2007–08.[10]
Over the past 40 years (to 2014) the banking system in the UK experienced a 'dramatic shift' with total assets increasing from 100% of GDP to 450%, and it is 'plausible that the UK banking system will continue to grow rapidly', owing to its probable 'comparative advantage' in international banking services, with the pre-eminence of London as a financial centre.[11]
As of Dec 2015, a number of new banking licences were secured, e.g. byAtom Bank andTandem Bank.[12]
In 2017, Business Insider came out with a list of the 18 most profitable banks in the United Kingdom while stating that the banks were now becoming profitable after facing challenges for the past few years. The top spot was grabbed by HSBC with an income of £5.49 billion followed by Lloyds with a profit of £4.04 billion.[13]
Under a scheme launched in September 2021, 159 can be dialled by phone to contact a selection of banks directly. This has been implemented as a method of preventing financial scams.[14]
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