Block 5. British Banking

*The British Banking System has developed over the past few hundred years to become one of the most highly specialised financial centres in the western world.

The head offices or main branches of banking institutions are concentrated in the City of London. *The Bank of England and the most important commercial, merchant banks all are situated in close proximity to one another.

The Bank of England is the central bank of the United Kingdom. It acts as a banker to the Government and to the other banks; as the central note-issuing authority; as agent of the Government for important financial operations; and as its adviser on many other aspects. The Bank also undertakes management of the National Debt and (as agent of the Treasury) the administration of exchange control.

The Bank of England in some of its functions serves as an agent of the Government and it is through the bank that monetary policy is implemeted. It is not, however, part of the Civil Service. The commercial banks, whose primary business is receipt transfer and encashment of different types of deposits, can be grouped as follows:

London clearing banks (Barclays, Lloyds, Midland, National Westminster -the "Big Four"), the Scottish and Nothern Ireland banks, the British overseas commonwealth banks, foreign banks.

Overseas Banks

In London there are from 110 to 120 banks, the bulk of whose business is carried on overseas. Many of these banks were set up in the nineteenth century to provide banking facilities to their customers throughout the world but mainly in the British overseas territories. *Many of them afterwards amalgamated and the London clearing banks have considerable interest in some of the largest.

The business of British overseas banks may be described as being basically that of exchange dealers and sources of credit for financing monetary transacions between Britain and the countries in which they are represented, as well as between third countries (these facilities also include acceptance credits, generating bills of exchange which can be negotiated at respective discount rates). They are also concerned with the employment in London of their temporary idle funds. They provide a means by which funds intended for investment саn readly be switched from one part of the world to another. Thus they facilitate movement of resources between London and abroad, as well as attracting deposits to London from overseas customers.

Foreign Banks

*The number of foreign banks in London and in other major cities in recent years has rapidly expanded. US and Japanese banks are the most prevalent but not at all surprisingly there are also increasing members from various European countries.

Representation takes different forms. *Some banks operate through subsidiaries whilst others have opened branches in their own name. There are also large numbers of representative offices, which do not handle banking business but mainly promote and facilitate business relationships. Quite often a representative office serves as the first step towards setting up a branch or other institution.