The 2007 financial crisis caused widespread damage to not only the UK banking sector, but to the economy as a whole. In the process, it also caused massive harm to the reputation of bankers in general. One of the ways that banks are trying to solve this problem is by creating schemes to pay citizens back. However, repairing such a damaged relationship with the UK taxpayer will require innovative thinking by those involved in the UK financial industry.
According to a report released by the UK treasury committee, on April the 2nd 2007 there were nine banks listed on the FTSE 100 share index. In total, these banks had a combined capitalization of £316.9 billion. This made them the largest industry featured on the index. By 2009 the banking sector was worth only £138.1 billion, meaning that a stunning £179 billion in market value had been destroyed. In the process, the Royal Bank of Scotland (RBS) group, Lloyd TSB, and HBOS all needed a financial bailout from the government.
When the risk-taking behavior that led to the destruction of the banking sector was revealed, the general public was infuriated. The anger directed at bankers was also due to the effect the banking crisis had on the larger economy. The crisis lead to a spike in unemployment and bankruptcies. It also required unpopular austerity measures that affected the lives of millions of UK citizens.
According to the BBC, taxpayers have lent over £185 billion pounds to thirty banks and building societies through the Bank of England’s Special Liquidity Program. And this is just one of the relief programs funded by the taxpayer. The idea behind these relief programs is to get banks stabilized and encourage them to start lending again, and this appears to be working to some degree. In the third quarter of 2013, banks involved in certain schemes tripled the amount that they lent out. Unfortunately, many of their customers were already suffering from high levels of personal debt as a direct result of the financial crisis.
The challenges both for financial institutions and banking customers appear immense. However, there are organizations that are attempting to tackle the problem. Payplan’s new debt map has compiled data that aims to help both debtors and the banks that they owe. One of the ways that they are helping both parties is by providing mediation services and personalized advice. They are also helping to establish which areas are suffering from the worst debt levels. This is done by creating a debt map which is graphical representation of debt levels in each post code.
The debt map also helps debtors to understand that they are not alone with their financial problems. As a consequence they are more likely to seek help in addressing their debt management issues. Banks and other financial institutions would be well-advised at looking at similar ways to help their customer’s and improve their tarnished reputation with the British taxpayer.