Enhancing the financing of the real economy and financial stability in the United Kingdom


OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.


Enhancing the financing of the real economy and financial stability in the United Kingdom

The banking sector in the United Kingdom (UK) was deeply affected by the crisis. Bank credit has collapsed reflecting both weak demand and tighter supply. New prudential requirements have improved the resilience of the banking sector and a number of measures were taken to support credit supply. These included conventional and unconventional monetary policies, policies to address credit constraints with Help to Buy and Funding for Lending programmes, and a number of public programmes to improve access to finance united under the roof of the British Business Bank. Further structural reforms are needed to improve competition in the SME credit market and to boost credit provision to SMEs in the medium term. Sustainable financing of the economy and greater financial stability should be achieved by sound regulation, ensuring high capital requirements for systemically important banks, improving banks’ resolvability and fine-tuning the use of countercyclical measures. Data should be collected on a wider set of financial institutions than currently done and macroprudential regulation should be gradually extended beyond the banking sector to prevent the migration of systemic risks.
This Working Paper relates to the 2015 OECD Economic Survey of the United Kingdom (www.oecd.org/eco/surveys/economic-survey-united-kingdom.htm)


English

Keywords: banks, capital, SMEs, house prices, deleveraging, mortgages, financial stability, household

JEL:
G28: Financial Economics / Financial Institutions and Services / Financial Institutions and Services: Government Policy and Regulation;
D24: Microeconomics / Production and Organizations / Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity;
D14: Microeconomics / Household Behavior and Family Economics / Household Saving; Personal Finance;
G21: Financial Economics / Financial Institutions and Services / Banks; Depository Institutions; Micro Finance Institutions; Mortgages