Influence of Banking Sector in Economic Growth

This report investigates the influence of banking sector in economic growth and development of UK country with a case study of HSBC bank. It analyzes the different activities of banking sector, role of banking sector on economic growth and development of UK, and the relationship of banking sector and economic growth.

Influence of banking sector in economic growth

Table of Contents
INTRODUCTION...........................................................................................................................1
Research questions.......................................................................................................................1
Research aim................................................................................................................................1
Research objective.......................................................................................................................1
Background of topic....................................................................................................................1
LITERATURE REVIEW................................................................................................................2
METHODOLOGY..........................................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
Economic growth and development play crucial role in overall enhancement of the country.
This is one of the essential objective of every nation. This assist in meeting prerequisite
requirements in order to satisfy human willingness as well as meeting their requirements.
Banking sector play significant role in enhancing economic growth rate of the nation (Zhang,
Yao and Zhang, 2020). This research report is based on HSBC Holding Plc which is a British
multinational investment bank as well as financial service holding company. HSBC is a public
limited company that is dealing in financial sector. This organisation was developed in 1885 and
founder of HSBC is Sir Thomas Sutherland. Head office of this company is located in 8 Canada
Square, London, England, UK. This research report is on topic the influence of banking sector in
economic growth and development of UK country. Apart from this, different methods and
approaches of data collection has been determined in this report.
Research questions
 What are the different activities of banking sector?
 What is the role of banking sector on economic growth and development of UK?
 What is the relationship of banking sector and economic growth?
Research aim
To investigate the influence of banking sector in economic growth and development of
UK country. Case study of HSBC bank.
Research objective
 To analyse different activities of banking sector.
 To identify the role of banking sector on economic growth and development of UK.
 To evaluate determine the relationship of banking sector and economic growth.
Background of topic
Banking sector is consider as very important part for economic growth due to its abilities
in gathering as well as attracting deposits form savers (Zeqiraj and et.al., 2020). It is providing
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loans in order to encourage investment along with the production as well. Economic growth
hypothesis accepts that financial establishments uniquely bank is viewed as a helpful instrument
for working on the useful limit of the economy and its significant internal wellspring of fund for
any country uncommonly in the birth phases of economic growth. Financial establishments give
more fund to help economic exercises and that leads banking credits cause economic growth. the
linkage between banking sector advancement and economic growth are affirmed that the
directional connection among financing and economic growth is critical and positive. Banking
sector is significant for creating economic expansion to different other sector of UK nation such
as agriculture, industry and trade sector. Financial development will lead to have positive impact
on economic growth of nation and higher economic growth rates will lead to cause higher
demand of credits.
LITERATURE REVIEW
 To analyse different activities of banking sector.
As per the article , it has been identified that there are several activities and task which is
associated with banking sector. It is important to carry out these activities in significant and
effective manner with the motive of attaining desired goals (Abbas and et.al., 2021). Banks
play out an assortment of tasks going from essential or essential capacities like everyday
exchanges at a branch to others that possibly the organization or general utility services in
nature. The exchanges that are coincidental to income/deals or supporting the business are a
significant component of the banking business esteem chain. Banks perform different sorts of
exchanges and exercises to help their banking business. These exchanges might incorporate
making or tolerating installments, exchanging, clearing and settlement of records, and
authority. Knowing the functional parts of banking is vital for understanding the worth chain
of the banking business.
The key operational activities which is included in banking sector are acceptance of deposits,
lending of funds, clearing of cheques, Remittance of funds, investment banking, credit and
debit cards and many more. All of these are significant activities of banking sector which
needs to be performed in correct and accurate manner.
 To identify the role of banking sector on economic growth and development of UK.
According to the views of Jittima Tongurai (2021), it has been analysed that there are
different role of banking sector which is significant for economic growth and development of
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UK (Haini, 2021). This will assist in enhancing overall performance of nation as well as attain
growth. Different role of banking sector on economic growth and development is mention below
–
 Capital formation – The major role of banking sector on economic growth is that it is a
capital formation. It has been analysed that deposits accepted by banks are majorly
converted into loans and advances for trading or industrial activities to organisation.
Through this banks are able to convert saving into investment which will lead to capital
formation. This is significant for economic development practices.
 Development of credit policy – It has been analysed that central bank of UK nation is
creating a proper policies for monetary by identifying or determining the bank rates. This
will lead to have significant impact over interest rate and credit policies of the country.
This will ultimately lead to have positive impact over economic growth and development
of the nation.
 Facilitates foreign trade – It has been determined that banking sector play significant role
in facilitating import and export transaction (Zavadska, 2020). This is significant for
facilitating foreign exchange that is used for UK nation economic growth and
development.
 To evaluate determine the relationship of banking sector and economic growth.
As per the views of Mary Hall and Somer Anderson (2021), It has been analysed that there
are huge relationship between banking sector and economic growth of nation. The banking sector
is an industry and a part of the economy committed to the holding of financial assets for other
people and contributing those financial assets as a utilized method to make more riches. Banking
sector receptiveness may clearly influence growth by working on the admittance to financial
services and in a roundabout way by working on the effectiveness of financial delegates, the two
of which decrease the expense of financing, and thusly, invigorate capital amassing and
economic growth .Increases in banking services and financial exercises are speeding up economy
toward growth. Nations whose economies become quicker, are compelled to dedicate greater
speculation on working on their financial framework to settle their economic environment.
METHODOLOGY
Research methodology can be depict as the cycle as per which researcher is effectively and
viably directing investigation rehearses. This extent shapes an essential and most significant
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piece of each research suggestion that gives a total arrangement about technique and approach
utilized for addressing the set research questions and goals.
 Data collection method – This is significant part of research as it will assist researcher in
finding and gathering accurate information about the research. There are two types of
data collection method that is primary method and secondary method. Primary method
includes information that is original and collected for the first time. This will assist in
finding accurate and appropriate information. Where as other secondary method includes
data which is collected through primary data. Secondary data is cost and time effective
method to find information.
 Type of research – This includes deductive and inductive which is consider as two
fundamental kinds of research which could be applied by a research. Deductive research
is appeared to be in accordance with positivism philosophy while utilization of inductive
methodology is made with interpretivisim philosophy. This is significant for finding
relevant and appropriate information with the motive of attaining desired goals.
 Research approaches – Research approaches are significantly ordered into two principle
sorts of research technique which includes qualitative and quantitative research. In which
qualitative is an emotional based strategy while quantitative includes numerical and
statistical data for study.
 Research design – This part of research methodology gives a total structure and base for
investigation which is mostly separated into three primary sorts exploratory, descriptive
and explanatory investigations. Through these various types of research plan, implication
of descriptive examinations is proposed for ebb and flow investigation as it supports to
acquire an exact profile of occasions alongside assortment of more solid information.
Thus, in order to conduct this research report investigator is considering primary and
secondary method in order to find relevant information. It includes deductive research as it is
more logical and systemic for gather required information. Quantitative research approach
has been considered in this research with the motive of gaining desired outcomes.
CONCLUSION
From the above report it has been concluded that banking sector play significant influence
over growth of nation economy. There are several activities which is included in banking sector
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that will lead to enhance and improve economy of the nation. It play significant role in
improving economic growth rate of UK nation.
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REFERENCES
Books and Journals
Zhang, Y., Yao, D. and Zhang, C., 2020. Bank loan versus financial lease: how do traditional
and innovative approaches within the banking sector influence economic growth? A comparative
analysis between the US and China. Applied Economics, 52(40), pp.4366-4383.
Zeqiraj, V. and et.al., 2020. Banking sector performance and economic growth: evidence from
Southeast European countries. Post-Communist Economies, 32(2), pp.267-284.
Abbas, F. and et.al., 2021. Bank Capital Buffer and Economic Growth: New Insights from the
US Banking Sector. Journal of Risk and Financial Management, 14(4), p.142.
Haini, H., 2021. Examining the nonlinear impact of the banking sector on economic growth:
evidence from China’s Provinces. Journal of Chinese Economic and Business Studies, pp.1-18.
Zavadska, D., 2020. Scientific rationale for the influence of banking sector on the innovative
development of economy. Financial and Credit Activity: Problems of Theory and
Practice, 3(34), pp.52-62.
Online
The impact of the banking sector on economic structure and growth. 2021. [Online]. Available
through: < https://www.sciencedirect.com/science/article/abs/pii/S1057521918300073>.
Banking Operations: Understanding Various Transactions & Activities. 2021. . [Online].
Available through: <https://www.technofunc.com/index.php/domain-knowledge/banking-
domain/item/banking-operations >.
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