Banking in The United Kingdom - 21st Century

21st Century

Currently banks in the United Kingdom have refined their services with most offering very similar services being distinguished only by offering different interest rates. Indeed a very recent trend has been to not advertise interest rates as this avoids the banks having to offer such advertised rates to at least 60% of their customers.

In 2006 the Office of Fair Trading found that the banks were exploiting penalty bank charges on credit cards and has suggested that banks restrict such penalty to a maximum of 12 UK pounds. Penalty charges or Liquidated damages are illegal in UK contract law unless they represent the real cost of a breach of contract incurred through an unauthorised overdraft level or bounced cheque.

This ruling by the OFT had been extended by many customers to their personal bank accounts and subsequently the UK small claims court system was flooded with cases of customers reclaiming these ‘illegal’ penalties. It had been reported that nearly 1.8 million template letters to take the banks to court had been downloaded from the website MoneySavingExpert.com. In October 2009 the Supreme Court overturned previous rulings allowing the OFT to investigate overdraft charges, bringing to an end such claims. 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.

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 told after the 20 March 2008-meeting that participants had "agreed to continue their close dialogue with the objective of restoring more orderly market conditions."

As of 11 October 2008, the British banks have short-term liabilities equal to 156% of the British GDP or 368% of the British national debt, while the average leverage ratio (assets/networth) is 24 to 1.