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Oligopoly of Banks

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Oligopoly of Banks
BRITISH BANKS: CRACKING THE OLIGOPOLY

Student: Aruni Dileepa Wijeweera - 16639300
Student: Elie Gharib - 16443365
Student: Ying Sheng - 17903022

Lecturer: Dr. Neil Perry
Economics 200425
Due Date: 18th November 2013

United Kingdom (UK) banking industry started in 1694 with the establishment of Bank of England, with the main purpose of funding the war against France. Throughout the years and with the expansion of the banking industry, many private banks invaded the market and started their operations. During the twentieth century, large banks started to acquire or merge with small banks thus leading to a more concentrated market. (British Banking History Society)
UK banking industry is known by the “Big Four Banks”: Barclays, Hong Kong and Shanghai Banking Corporation (HSBC), Lloyds Banking Group and The Royal Bank of Scotland Group (RBS). These banks have controlled the market in UK by seizing 77% of the market share that lead to an economic situation called oligopoly (Treanor, 2012).
A situation, where there are few firms producing all or most of the market supply of a particular good or service, is the standard definition for the market structure of an oligopoly. Oligopoly seems to be an economic structure that is easy but unfortunately it is much more complicated and multi layered market with several characteristics (Nellis & Parker, 2006).
Following the Global Financial Crisis that hit the world in 2008, many governments had to step in and bailout several banks in order to save their market from a severe crash down. UK government intervened twice in order to restore market confidence and stabilise the British banking system. (Peston, 2008) After the takeover of HBOS in 2008, the European Union (EU) ruled Lloyds in 2009 to sell 631 branches in order to increase competition and customer choice in the banking industry through creating a new bank (Trotman, 2013). This was the result of the bailouts Lloyds and other banks

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