Sunday, October 6, 2019
Failure of Financial Regulation in the UK Essay
Failure of Financial Regulation in the UK - Essay Example This essay evaluates the failures of financial policies in United Kingdom and the move made by policy makers to cushion the country from falling into financial crisis. Financial crisis witnessed towards end of this decade had similar effects to crisis witnessed in 1970s. Many people grappled in unemployment, devaluation of wealth and other related issues that come when economic depression occurs1. G 20 meeting realized that policy tools made to cushion the world from economic slump had failed to discharge their role. It was also apparent from that meeting that the banking policies of United Kingdom and related market players had stains to the crisis. Growth in a country or in the world depends on sound policies, which balances the financial market and enhances economic stability. Economists and analysts in the economic sector believe that fiscal tools, which guide the economic growth of the country, must meet a certain threshold if the country is to remain stable. Deliberation of the meeting indicated that credit securitization is a factor that policy makers in the financial sector ignored2. Many banks offered credit loans to investors without collaterals that could support financial stability. The banks could not raise the minimum threshold required to make them remain in businesses after the investors had defaulted. The result was as worst as the financial depression of 1970s. Critics have contributed to this situation by making different argument about the country should do to avoid similar misfortune. The argument has rested on the effects of policy, which influence banking system. Some critics noted that policies instituted to correct the dangers of economic depression failed because of poor implementation strategy, which aimed at making the country more economically sound. Many economists believe that policy tools adopted in the banking sector created a window, which led to the economic meltdown. Evidently, a weakness of a policy can create instability as observed during the financial crisis. The major question that the society is trying to answer is not what caused the depression but how it can avoid the depression in future. Analysts have settled on the fact that failure of UK financial system is the contributor of the economic crisis. Economists have stated three reasons, which support the argument that policy failure led to financial meltdown. First, the role of financial market is to regulate market economy3. This regulation occurs through relationship that exists between the financial system and the market players. Economists believe that financial relationships influence market structures by creating stability and instability in the market. This means that financial system is the key driver to propel market structures towards making balance payment in the market. A failure of the system spells doom to the society since it creates imperfect operation in the market. Evidently, a slight mess bin the market would contribute to a collapse of other systems in the financial sector. Financial analysts have sited burst and boom factors as factors that directly influence market stability. Financial system usually look at credit supply and credit pricing as factors that control speculation in the burst and boom factors. Studies indicate that internet burst and boom witnessed in 1998-2001 increased the liquidity index in the country4.