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Bailout Funds - Maintaining Economic Stability or Representing Political Motives (2012)

Ref: fin0040

The deficit in money has been seen to emerge from a bailout of recent economic and financial crisis, which have dominated a potentially prolonged recession triggered by the collapse of wholesale consumer credit market. So far, the UK government has lent approximately £150 billion (bn) bailing out the banks i.e. Nationalisation of Northern Rock and stakes in Lloyds TSB and RBS. Essentially, the real economy has benefitted very little from the money that has been spent in restructuring the financial institutions. Total scale of bailout funds spent amounts to 25% of the UK GDP. Yet, it has been noted that most of the bailout money is utilised by the banks to pay off the losses and debts that they have accumulated on their books. Does this represent fair appropriation of tax payers’ money? This paper examines the need for bailout funds by the key players in the banking industry and any potential motives that represented political interests; driven as part of the package. In order to achieve the desired outcome, the piece will take a two pronged methodology. The first aspect will be to examine the quantitative data for Royal Bank of Scotland, Lloyds TSB, Halifax Bank of Scotland and Northern Rock: the four main banks to require significant bail outs. This data can then be analysed to determine the extent to which the bailouts were required, and their impact when compared to other banks which did not require bailouts. In addition, an attempt will be made to derive a quantitative measure of the potential damage to the economy had the banks not been rescued. The second aspect will be based on a series of interviews with financial experts looking to add more detail to the initial analysis, and also to understand the qualitative role of the bailouts, such as their impact on investor confidence levels and on the economy of the UK in general. These two strands of research will be used to help address the research question and determine the actual motivations behind rescuing the banks.

  • 15,000 words - 56 pages in length
  • Excellent use of literature
  • Good analysis of subject area
  • Well written throughout
  • Ideal for finance and accounting students


1 - Introduction
Background
Insight to the UK Crisis
The Bailout Plan
Research Issue
Examining the Issues
Methods of Research

2 - Literature Review
General Theoretical Background
The Nature of Financial Services and Government’s Financial and Fiscal Policies
Theoretical Arguments Behind Bank Bailouts
The UK Bailout Scheme
Potential Issues with the UK Bailout

3 - Methodology
Research Objective
Research Design
Qualitative and Quantitative Data
Quantitative Data
Qualitative Data
Methods of Analysis
Justification of Methods
Reliability, Generalisation, Validity and Limitations

4 - Quantitative Analysis
Financial Data
Northern Rock PLC
The Royal Bank of Scotland (RBS PLC)
Lloyds TSB PLC
Halifax Bank of Scotland (HSBC PLC)
Barclays PLC
Data Analysis
Quick Ratio
Deposit to Loan Ratio
Funding Deposits
Funding Securities
Proportion Derivatives
Cash to Financial Liabilities Ratio
Liabilities to Equity Ratio
Summary of Quantitative Findings

5 - Qualitative Analysis
Interviews with the Experts
If Banks Were Not Bailed Out
Moral Hazards and Market Inefficiencies
Political Ramifications

6 - Conclusion
Conclusion and Findings

References

Appendix
Schedule of Interviews


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