CASE STUDY essay
In reviewing the causes of the U.K. Government’s intervention (direct support) in 4 banks (Royal Bank of Scotland, Lloyds, Northern Rock, and Bradford & Bingley) in 2007 – 2009, there are views that the regulators through their actions and inactions significantly contributed to the situation in which they had to bailout or nationalize the above-mentioned banks.
Task 1 : A newly appointed Director from HM Treasury has hired you with the task of writing a brief case study about ROYAL BANK OF SCOTLAND, in order to reassess current financial regulation and supervisory regime in the U.K. and contrast it with the regime from 2007-09.
Task 2 : The Director has also asked that you include suggestions on how regulators can be made more effective in providing a robust and reliable supervision and regulation of banking sector.
Task 3: However, in the light of the current uncertain macroeconomic situation (Brexit), you have been also asked to identify potential benefits and costs of such policies.
Case study must be in an essay type.
In your case study should amongst other things consider the following
- Briefly outline the banking industry and its regulatory/supervisory environment in the U.K. before the recent financial crisis. (FSA, the Treasury, BoE)
- Introduce a historical background, development, and a position in the banking industry of the chosen bank. (e.g. Northern Rock from a niche local BS to a major mortgage issuer in a short time)
- Present a timeline of events related to the examined bank falling into near-insolvency and the bailout (or nationalisation) phases that followed. (bullet points or a diagram etc. can be done in an appendix)
- Identify the main parties involved and critically evaluate/contrast their respective roles i.e. whom to blame, who paid the bill, who was punished and how? (your critical & objective!! analysis based on the research conducted)
- Critically analyse U.K. regulators’ actions and inactions which contributed to the point in which the investigated bank had to be rescued. (falling under the previous point)
- Suggest a set of policies to improve supervision and regulation of banks in the U.K. (e.g. a contingent explicit bailout policy, a ban on lending to uncreditworthy customers etc.). This is the part where you can apply what you have learnt so far and add some more to shine and impress the reader
- Contrast those policies with what have been done so far in the U.K. (e.g. Vickers Report and his recent criticism etc.)
- Identify potential effect (costs and benefits) of proposed policies. A fragile balance (even more fragile due to BREXIT) between lax and excessive regulation, angry public vs. banking lobby and losing London’s special position as an international hub, forgone profits and EDIS vs. tax revenues, moral hazard and market discipline…