Financial Regulation: Barclays Bank & Fintech Competition

This report provides a comprehensive analysis of financial service regulation, primarily focusing on Barclays Bank within the UK context. It begins with an introduction to financial regulation, outlining its purpose and the types of institutions involved. Task 1 delves into the strengths and weaknesses of UK banking regulation, assessing its role in ensuring bank resilience and governance, including an analysis of the impact of the PPI scandal. It also evaluates the post-crisis international and national regulatory environment, identifying both advantages and disadvantages for Barclays. Furthermore, the report explores the ability of UK banks to compete against international Fintech companies and other non-bank financial providers under the new regulatory framework, highlighting key competitive strategies. Finally, the report concludes with recommendations on the effectiveness of regulation in fostering a reliable and robust banking sector, emphasizing the need for clear regulatory scope, appropriate distinctions between activities, and improved supervisory frameworks.

Financial Service Regulation

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
1.Analysing and evaluation of the strengths and the weaknesses of banking regulation in
ensuring resilience and governance of the bank.........................................................................1
2.Evaluating the advantages and the disadvantages of the post-crisis international and the
national regulatory environment to the bank..............................................................................3
3.Evaluating the ability of the UK banks in competing against the international FINTECH and
the other non-bank finance providers under the new regulatory framework..............................4
4.Recommendation on the effectiveness of the regulation in facilitating a reliable and the
robust regulatory environment in the banking sector..................................................................5
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Financial regulation involves the regulation or the supervision which are subjected to the
financial institutions towards a certain requirement, guidelines and the restrictions, aiming in
maintaining the integrity in the financial system. This might be handled by either the non-
government and the government organization. The foremost purpose of the financial regulation
is protecting the investors, promoting the financial stability, maintaining market orderly,
competition, prevention of the financial crime and the fairness. The major classification of the
institutions that avails the financial service involves the internet banks, central banks,
commercial banks, retail banks, credit unions, investment banks, brokerage firms, savings and
the loan associations, insurance companies and the mortgage companies. The present study is
based on the Barclays bank, a British multinational financial service corporate and the
investment bank, headquartered in the London. Apart from the investment banking, this bank is
organized in several businesses such as personal banking, wealth management, corporate
banking and the investment management. Furthermore, the report describes the strengths and
weaknesses of the regulation in UK. Advantages and the disadvantages of the post crisis to the
Barclay bank and also explains the practices that adopted by UK banks in competing with
international FINTECH. Lastly the study includes the recommendations on the effectiveness of
the regulation.
TASK
1.Analysing and evaluation of the strengths and the weaknesses of banking regulation in
ensuring resilience and governance of the bank.
Bank selection
Impact of P.P.I. scandal on the financial strength of selected bank
Governance of current post-crisis bank regulation
Strengths of UK banking regulation in ensuring governance and resilience of the banks-
Facilitate fragile function of the banks- In the banking the deposits are considered as the
liabilities and the lending of money or loans are stated as the assets. Therefore, the balance sheet
of the bank is largely comprises the liquid liabilities and the non-liquid assets (Kshetri and
Kshetri, 2017). In the case if the people loses the confidence in terms of the system of banking,
it is called as the situation of bank run. The liquidity of the bank is trapped in the long term
investments as they supply the loans from their pooled deposits. Hence, UK banking regulation
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acts as the guidelines for the banks to run their activities smoothly. The risk of the bank run can
be mitigate with the help of the banking regulation.
Avoids Presence of the systematic risk- The UK financial institutions and the banks that
are highly interconnected implies or imposes the systematic risk in the system of banking. A
default by any bank can leads the other banks in the default towards their creditors and the
counter parties (Bauer and et.al., 2018). This effect might lead to the catastrophic effect on the
other financial institutions. Therefore, as UK banking regulation provides all the information and
the principles regarding the authority who will be responsible for overseeing the banking system.
This helps in monitoring and restricting the activities of the banking that are unfair which in turn
may results in the banking failure. Thus, regulations prevents the financial crisis in the economy.
Protection of the depositors- The depositors that acts the creditor of the banks are not
informed or aware about the investment activities of the banks. The risk of the moral hazards
incurred when the banks make investment in highly risky assets by using the money of the
depositors. Banking regulations provides the assurance to the depositors in terms of the resilience
and the banking governance (Docherty, 2018). These guidelines maintain the confidence of the
depositors in the financial system as rules regarding their protection are provisioned.
Furthermore, with the guidelines regarding the insurance of the deposit, it prevents the depositors
and reduces the chances of the bank run in the financial system of the country.
Theses are the strengths of the UK banking regulation as it provides a good understanding and
include all the aspects relating to the bank as well the depositor's financial stability. It is very
important preventing the financial crisis and acts as the bases for reporting of any unfair
practices by the firm.
Weaknesses of UK banking regulations-
Poor structure- The regulations relating to the licensing and the permissible activities of
the bank are not defined or distinguished clearly which creates complexities for the banks to
understand (Kshetri, 2016). Their application becomes difficult due to the presence of unclear
structure so the regulations must be framed in a manner that appropriately distinguish the
concept of licensing and the permissible activities.
Lacks robust and the relevant definitions- The terms used in the regulation differs as per
the legal traditions. It differs between the civil law and the common law traditions (Dierick,
2018). This means the regulations includes more of the definitions in terms of the civil or the
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commercial codes which h are been overlooked by the banks and the people and act as of no
means.
Adequate specifications are not provided in relation to the supervision of banking- An
adequate or appropriate framework must be provided in the banking regulation regarding the
authority who will be supervising the banking activities. However, in UK banking regulations
not any guidelines are mentioned regarding the supervisory authority. Such guidelines depict the
objectives of the supervisor which are to be fulfilled to attain the soundness of the banking
system and to prevent the depositors from any unfair practices.
2.Evaluating the advantages and the disadvantages of the post-crisis international and the
national regulatory environment to the bank.
As viewed by the Gomber and et.al., (2018), Barclay bank has enjoyed the benefit of the
post-crisis national and the international regulatory environment it has enhanced its resilience
globally towards the future market risk by building up its capital and the liquidity buffers. The
greater use of the stress testing by the Barclay bank and its supervisors as the post-crisis
facilitated greater resilience on the forward looking. This provides for the better support to the
bank of their credit flows in the bad as well as the good times. On the other side it identified by
the Chambers, Collins and Krause, (2019) that, Barclay bank faces many challenges in adopting
these changes and are complex or difficult to assess. However, Tuytens, (2019) depicts that
Barclay bank after the crisis has shifted towards the more stable sources of the funding and made
their investments in safer and less risky assets. On the other state Naczyk, and Hassel, (2019)
identified that, theses adjustments are based on certain factor that includes cyclical factors like
monetary policy and thus might diminish as per the changes in the conditions. Moreover, it has
been analyzed by the Bogusz and et.al., (2018), Barclays bank through the qualitative evidence
had considerably strengthened their practices prevailing internally and achieved stronger risk
management. On the other hand it is viewed by the Docherty, (2018), investors holding equity
remained skeptical because of the non-recovery of the investor sentiment in the market based
indicator towards the Barclay bank with the attainment of the low profitability. By carrying the
simulation analysis working group suggested that bank required to execute further structural
adjustments and the cost-cutting. However, after the crisis Barclays bank had emphasized
geographically in relation to their international strategy and had been seek to intermediate
towards more of their claims locally in terms of international regulatory environment. On the
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other state, crisis has resulted decline in the direct connection of the Barclay bank with other
banks through the derivative and the lending exposures. Moreover, system of the Barclays bank
had made progress with relatively gaining high capacity in the consolidation. It is viewed by the
Kshetri and Kshetri, (2017) that, the effects of the reduced diversity in the business model arises
from the Barclays bank re- positioning cannot be assessed towards the commercial banking. This
trend had been reached by the shift of the bank towards the more stable sources of the funding.
Further the progress had been seen in range of the systematic stability enhancement on the
recovery and the resolution framework. Thus, Bauer and et.al., (2018), viewed that, due to the
crisis strong growth has been achieved in the overall assets of the banking sector. However,
some banking sector in the UK has faced shrinking position in the overall economy. This
occurred because of the reduction in their business volumes instead of the exit of the enterprise
from the overall market. Advancement in the banking sector been seen in those countries that
were very less affected by the crisis, specifically in the emerging market economies. The reduced
risk had been observed at the time of losses due to crisis in the trading of non-equity and the
businesses of market making of the Barclays bank also reduced.
3.Evaluating the ability of the UK banks in competing against the international FINTECH and
the other non-bank finance providers under the new regulatory framework.
The response by the UK banks to the fin-tech interruptions is a crucial aspect to the present
stage. Fin-tech startups majorly emphasizing on the concept of the unbundling banks, where one
type of the product or the service is offered and concentrated on doing it by adopting the best
opportunities. However, innovations made by the Barclays bank and the other banks has been
greatly strives for the competitive advantage against the Fintech international by offering the
specialized services with improvement in the facets of the customer facing financial services. For
example such innovations include-
Better service- Traditional banks largely attracts the customers by offering them the
several kinds of the services which make the customers sticky as the switching cost is high
(Docherty, 2018). On the other hand Fintech companies follow the provision of earning the trust
of the customers by facilitating them good customer services. Majority of the Fintech companies
has cited their competitive edge by enhancing experience of their customers.
Better branding- Fintech companies by using the latest marketing tools such as
gamification helps in appearing the budget exciting and more and more palatable to the
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consumers. This induces the UK banks in developing more innovations and the gaining the new
opportunities for achieving competencies.
Cheaper prices- UK banks containing the virtual operation brings more flexibility in the
financial system while Fintech companies generating the cash from the venture capital allows
their startups in attracting the large customer base with the competitive pricing.
4.Recommendation on the effectiveness of the regulation in facilitating a reliable and the robust
regulatory environment in the banking sector.
Clear scope of the application of regulation- The laws and the rules provisioned under
the banking regulation must be defined clearly so that proper application can be done by all the
banks which in turn facilitates the reliable and robust regulation for the banking sector. All the
aspect of the scope must be mentioned that includes the policy in relation to the lending activities
of the financial institution through the short-term financing must be differentiated from they
deposit. This scope is defined as the “shadow-banking” problem (Kshetri, 2016). The exact
identification in relation to the coverage of the type of activities of the non-banking financial
institution in the banking regulation is the matter of the effectiveness. Separate working of the
approaches must be included in terms of the legal ramifications in the UK banking regulation.
Appropriate distinction between the activities- the matters relating to the licensing and
the permissible activities of the banks must be distinguished so that more effective looking can
be presented and this leads in providing reliable and relevant regulatory framework. The
regulation must include the banks who need to take license for various activities and specifying
those activities. Breach of this licensing need by the bank will be liable for the punishments
provided as the criminal sanction (Gomber and et.al., 2018). The laws will be said to more
effective which sets out the activities that are not subject to licensing. The permissible activities
such as electronic money issuance, safekeeping, vaults, provision of the payment services and
the overseas exchange transactions.
Ensuring the scope of the regulation in terms of individual as well as corporations.
This means the regulation need to clearly define that all the individuals, corporations and the
non-legal enterprises are accountable in any non-compliance that are provided in the relevant
provisions.
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CONCLUSION
From the above report it is concluded that banking regulation of the UK plays an
important part in smooth functioning of the banking system and the interest of the depositors is
been efficiently managed. The structure of the regulation should be more specific and clear so
that better understanding can be evaluated. Many challenges had been faced by the Barclays
bank at the time of the post crisis under the international and the national regulatory
environment. UK banks has been adopting many innovations and practices for competing against
the Fintech companies.
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REFERENCES
Books and journals
Bauer, G. and et.al., 2018. The global financial cycle, monetary policies, and macroprudential
regulations in small, open economies. Canadian Public Policy. 44(2). pp.81-99.
Bogusz, C. I. and et.al., 2018. Introduction: FinTech and shifting financial system institutions.
In The Rise and Development of FinTech (pp. 1-18). Routledge.
Chambers, D., Collins, C. A. and Krause, A., 2019. How do federal regulations affect consumer
prices? An analysis of the regressive effects of regulation. Public Choice. 180(1-2). pp.57-
90.
Dierick, F., 2018. EU policies to support financial integration. In Elements of the Euro Area (pp.
87-102). Routledge.
Docherty, A., 2018. How should banks manage the strategic risks associated with new
regulations and new sources of competition?. Journal of Risk Management in Financial
Institutions . 11(2). pp.109-124.
Gomber, P. and et.al., 2018. On the fintech revolution: interpreting the forces of innovation,
disruption, and transformation in financial services. Journal of Management Information
Systems. 35(1). pp.220-265.
He, M. D. and et.al., 2017. Fintech and financial services: initial considerations. International
Monetary Fund.
Kshetri, N. and Kshetri, N., 2017. Cybersecurity in India: Regulations, governance, institutional
capacity and market mechanisms. Asian Research Policy. 8(1). pp.64-76.
Kshetri, N., 2016. Big data’s role in expanding access to financial services in
China. International journal of information management. 36(3). pp.297-308.
Naczyk, M. and Hassel, A., 2019. Insuring individuals… and politicians: financial services
providers, stock market risk and the politics of private pension guarantees in
Germany. Journal of European Public Policy. pp.1-20.
Tuytens, P., 2019. Countering financial interests for social purposes: what drives state
intervention in pension markets in the context of financialisation?. Journal of European
Public Policy. pp.1-19.
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