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The structure and relations of banking systems: the UK experience and the challenges of ‘levelling-up’

Author

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  • Colin Mayer
  • Philip McCann
  • Jacob Schumacher

Abstract

A decentralized banking system is marked by geographical dispersion of banks with close proximity of banks to their borrowers and strong long-term relationships between banks and their borrowers based on soft, tacit, as well as hard, codified information. It is important for promoting the development of small and medium-sized enterprises (SMEs) particularly in regional locations. In contrast, the UK has a highly centralized, concentrated banking system with weak relationships between banks and their borrowers. This has contributed to the high degree of regional disparity across the UK. The programme of ‘levelling up’ regions will require a more decentralized banking system. The cases of Germany, the US, and the Swedish bank Handelsbanken illustrate the advantages of decentralized banking. They also have important lessons for the way in which decentralized banking systems should be structured and organized and, in particular, for the regulatory arrangements that are conducive to their satisfactory functioning and avoidance of pitfalls to which they can otherwise be prone.

Suggested Citation

  • Colin Mayer & Philip McCann & Jacob Schumacher, 2021. "The structure and relations of banking systems: the UK experience and the challenges of ‘levelling-up’," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 37(1), pages 152-171.
    • Handle: RePEc:oup:oxford:v:37:y:2021:i:1:p:152-171.
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    File URL: http://hdl.handle.net/10.1093/oxrep/graa061
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    Citations

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    Cited by:

    1. Anna Stansbury & Dan Turner & Ed Balls, 2023. "Tackling the UK’s regional economic inequality: binding constraints and avenues for policy intervention," Contemporary Social Science, Taylor & Francis Journals, vol. 18(3-4), pages 318-356, August.
    2. Flögel, Franz & Hejnová, Tereza, 2021. "The effects of regional banks on economic resilience during the COVID-19 pandemic and the global financial crisis a cross-country comparison of the European countries," IAT Discussion Papers 21/01, Institut Arbeit und Technik (IAT), Westfälische Hochschule, University of Applied Sciences.
    3. Giorgio Barba Navaretti & Anna Cecilia Rosso, 2023. "Access to capital markets and the geography of productivity leaders and laggards," Journal of Regional Science, Wiley Blackwell, vol. 63(1), pages 64-113, January.
    4. Ming Chen & Jiao Wu, 2023. "State ownership may not be bad: Based on bibliometric research (2002–2021)," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1285-1304, March.

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