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5 - The Changing Risk Culture of UK Banks

from Part II - A View of Risk Culture Concepts in Firms and Society

Published online by Cambridge University Press:  22 May 2020

By
Duncan Needham  and
Anthony Hotson
Edited by
Michelle Tuveson ,
Daniel Ralph  and
Kern Alexander
Michelle Tuveson
Affiliation:
Judge Business School, Cambridge
Daniel Ralph
Affiliation:
Judge Business School, Cambridge
Kern Alexander
Affiliation:
Universität Zürich
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Summary

This chapter analyses the changing risk culture of UK clearing banks by charting the rise of more active asset and liability management. We focus particularly on the banks’ entry into the wholesale money markets and residential mortgage lending. The pattern of household property tenure changed significantly over the twentieth century. Before World War One less than a quarter of English households owned their homes. There was little demand for mortgages, and even less appetite on the part of bankers to supply them. By 2006, nearly three-quarters of English households were owner-occupiers with mortgages comprising two-thirds of clearing bank assets. The banks had transformed from conservative institutions that largely matched short-term retail deposits with short-term assets into real-estate lenders heavily reliant on wholesale funding. This asset-liability maturity mismatch was at the heart of the Global Financial Crisis. We conclude that the regulatory changes implemented in the wake of the Crisis have failed adequately to address this fundamental issue.

Type
Chapter
Information
Beyond Bad Apples
Risk Culture in Business
 , pp. 141 - 164
Publisher: Cambridge University Press
Print publication year: 2020

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References

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Bank of England Statistical Abstract (BOESA)

The Economist

Financial Statistics

The Times

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Other Sources

Bank of England Quarterly Bulletin (BEQB)

Bank of England Statistical Abstract (BOESA)

The Economist

Financial Statistics

The Times

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