Strategies for Managing Liquidity Risks in UK Banking Sector: A Study on Barclays Plc

To evaluate strategies undertaken by the
UK banking sector for managing risks
associated with liquidity aspects: A study
on Barclays Plc
1

ABSTRACT
The study summarizes key strategies adopted by UK’s banking industry for handling
multiple risks related to liquidity aspects in context of Barclays Plc. Barclays Plc deals in
different types of products which are retail banking, commercial banking, wealth management,
private banking, investment banking, wholesale banking etc. Main purpose of Barclays Plc in
providing financial services to the customers with purpose of attaining long term goals and
objectives. The research helps by improving my research skills such as decision making,
literature review, data collection, time management and many other. These skills helped in
completion of full project within given time period. At professional level, present study
supported me in getting of opportunity within banking sector. Therefore, current study is
important for me at personal and professional level.
2

Contents
ABSTRACT....................................................................................................................................2
Contents...........................................................................................................................................3
1. INTRODUCTION.......................................................................................................................4
1.2 Problem statement.................................................................................................................4
1.3 Conceptual framework..........................................................................................................4
1.4 Purpose of the research.........................................................................................................5
1.5 Research questions................................................................................................................5
1.6 Structure of the research........................................................................................................5
LITERATURE REVIEW................................................................................................................7
Introduction.................................................................................................................................7
Conclusion................................................................................................................................15
RESEARCH METHODS..............................................................................................................16
Introduction...............................................................................................................................16
Conclusion................................................................................................................................21
FINDING & DISCUSSION..........................................................................................................21
CONCLUSION..............................................................................................................................30
REFERENCES..............................................................................................................................33
3

1. INTRODUCTION
1.1 Background
Liquidity introduces to how assets can be converted into cash in easier way. It is an amount of
money that is available for spending and investment. It includes of notes, cash, bonds, treasury
bills and any other assets, which can be sold speedily (Ahmed, Bangassa and Akbar, 2020).
There are certain factors that directly affects liquidity position of an organisation. These are
obsolete inventory, bad debt, tight credit i.e. expensive or less trade credit.
Barclays Plc is a multinational investment bank that provides financial services to the
customers. Barclays Plc was founded in 17 November 1690 by the Nigel Higgins and
headquartered in London, England, UK. Main rationale regarding the selection of current topic
is to determine strategies undertaken by the UK banking sector for managing risks associated
with liquidity aspects. This is a main reason regarding the selection of current topic. Along with
this, current investigation is important at personal as well as professional level.
1.2 Problem statement
This research is helpful in evaluating the main strategies which are implemented by the UK
banking industry in order to manage the different risk related with liquidity to be maintained to
operate different operations. There has been a large gap between the usage of liquid funds by the
bank and the actual results that can increase the performance in a specific time frame. If banks
are not able to maintained an ideal liquidity ratio throughout the year they can face different
problems such as takeover of operation by other leading banks, disclose of main lending option
by central bank of country and even shift of customer account to other government banks (Al
Rahahleh, Ishaq Bhatti and Najuna Misman, 2019). Thus, with the support of this research
various useful ways are discussed which can help UK banks to maintain a decent liquidity option
so that any problem can be resolved and a respectable position can be preserve in the dynamic
competitive environment.
1.3 Conceptual framework
The main variable of this research in defining the conceptual framework for UK banking
industry is CAMLES model that help to check the overall liquidity of bank throughout a year. A
theoretical guideline is considering to be the wide as well as established series of laws,
perceptions, beliefs which support to define the importance of liquidity hold by bank to meet the
4

basis requirement of various operations. In simple words, the conceptual framework is beneficial
in arriving the actual hypothesis, such as CAMLES model elaborate the entire, capital adequacy,
assets quality, management effectiveness, earning within year, liquidity for the accounting period
and the size of company (Aloqab, Alobaidi and Raweh, 2018).
1.4 Purpose of the research
Research aim
Main aim of this research is “To evaluate strategies undertaken by the UK banking sector for
managing risks associated with liquidity aspects”: A study on Barclays Plc
Research objectives
 To identify the strategies used by banking sector of United Kingdom.
 To investigate the significance of those strategies in management of risk associated with
liquidity aspects.
 To determine the impact of risks associated with liquidity aspects on financial
performance of Barclays Plc.
 To identify the ways for managing negative impact of risks associated with liquidity
aspects in improving financial performance of Barclays Plc.
1.5 Research questions
 What are the strategies used by banking sector of United Kingdom?
 What are the significance of those strategies in management of risk associated with
liquidity aspects?
 What are the impacts of risks associated with liquidity aspects on financial performance
of Barclays Plc.?
 What are the effective ways for managing negative impact of risks associated with
liquidity aspects in improving financial performance of Barclays Plc.?
1.6 Structure of the research
This is an essential part of the dissertation because it facilitates reader in determination of
chapters that will be required for completing current project systematically (Anagnostopoulos
and Kabeega, 2019). There are different chapters that will be needed for completing current
dissertation in systematic manner. These will be explained as below:
5

Chapter 1: Introduction: In order to complete this chapter, there are various sub-activities,
which are problem statement, conceptual framework, purpose of research, research questions etc.
These are main activities that were helped in completion of such chapter systematically.
Chapter 2: Literature review: This chapter includes secondary information about the topic.
There are various sources used for collecting secondary information such as books, articles,
websites etc. This section also covers financial crisis, bank performance and CAMELS rating
model.
Chapter 3: Research methods: This is significant chapter because it will help in gathering of
accurate information through specific method. There are different methods that will be included
in this chapter such as capital adequacy,
Chapter 4: Findings and discussion
Chapter 5: Conclusion:
6

LITERATURE REVIEW
Introduction
A literature review is a survey which helps in acquiring knowledge on specific topic with
the help of already available information (Appiah and Bisiw, 2020). It provides an overview of
the current information where with the help of various relevant theories, methods, etc. The main
objective of literature review is to identify the gaps in the current information.
What are the strategies used by banking sector of United Kingdom?
According to Jim Marous, with the increase in the level of competition and changing
behaviour of customers, the banking industry is facing challenges and need to focus on important
exercises. In addition to this, the banks also get higher growth and success at marketplace. Here
are few strategies which are adopted by banking companies in order to increase its sales and
profit margins.
 Focus on improving digital customer experience- Main asset of the banking sector is its
customers hence they are focusing on improving customer experience. As customer’s
decisions changes frequently on the bases of the ease and facilities they are getting from
the service provider. Furthermore, with the increasing level of competition there is rise in
new roles and titles in the industry as their main motive is to acquire large number of
customers. It helps company to strengthen its market presence and grab high market share
which in turn leads to attainment of objectives timely and effectively. With the help of
digital tool, the banking companies have provided many online services that is customers
can take help of banks from anywhere which means no physical presence is necessary.
This decline the level of cost occurred to the company that impact positively on its
productivity as well as profitability level. They are focusing on mobile engagement and
also focusing on applying various resources with the motive to improve customer
experience. The companies dealing in banking sector need to evaluate resources in order
to determine the steps which are essential to measure success.
 Data analytics capabilities- Customer insight and data analytics is effective tools which is
helping retail banking in overcoming the differences a taking steps according to trends.
Banking industry is forming effective strategies in order to improve multichannel
delivery and explore use of APIs, etc. The companies having data find difficulty in
7

analysing what impact will it have on the performance of company (Bătae, Dragomir and
Feleagă, 2021). The problems faced by companies are IT complexity where due to some
technical issues there is deal in work process. Secondly due to lack of coordination the
chances of mistake are more which lead to deal in the completion of task. The risk in
banking sector is high in following behind in leveraging consumer insights as customer
expectation are increasing frequently. These expectations are meet by non-financial
competitors in the marketplace.
 Reduction in operating costs- As banking sector is charging less interest from customers
due to which more time and efforts are put by financial organisations in order to reduce
the costs at all possible areas. With the regular examination of digital banking
technology, the management need to put less efforts and also helping in reducing the
operation cost. In addition to this, banks are also able to improve its customer service that
leads to increase in customer base level and profitability level as well.
 Focus on customer outreach- It is important for the company to emphasis on reaching
large number of customers as it help in raising customer base level and growth at
marketplace. In addition to this, it also helps organisation to maintain its brand image and
sustain at marketplace for longer time period. With the use of digital and social media
marketing the primary focus of the banks is to connect with the customers and identify
their needs and preferences (Bhattacharyay, 2021). As the banks are using social media
for marketing, customer outreach is also an important factor for the effective
implementation of marketing strategy. The banks can strategically outreach the customers
through offering courses related to online security, mobile banking and financial literacy.
The marketing strategy for customer outreach should focus on maintaining relationships
with their customers.
 Combine personalization with the data: The marketing strategy of the banks should use
the data which will help the bank to provide better and personalized products and
services. The banks can provide automation algorithm through which the bank can
recommend the products and services based on the previous usage of the customers.
 Customer experience should be the priority: The marketing strategy of banks must create
a positive experience on their customers and the bank must deliver quality services to
their customers. The marketing strategies of the bank should focus on the techniques of
8