Crises of UK

The article earlier mentioned the problems of the US. Lets understand now the issues that were present in the UK.

UK is the leading center for trading activity. It is significantly influenced by securitised credits and shadow banking activities.

Like US, UK too has a current account deficit. However, the deficit is not matched by purchase of bonds as in the case of US. Instead, it is done by private corporations investments.

UK is also characterized by many foreign banks operations. Many banks like, Deutsche Bank, Icelandic Banks etc. have their operations.

The important point in UK is that the US Mutual funds and SIVs are major investors of the securitised credits models.

Also, major banks of the UK are established in the 'acquire and arbitrage' model. They depend the premise of 'liquidity through marketability'. Hence when the credit dries up, their inherent model fails, making them very vulnerable to the crises.

UK banks mainly function through the sale of securitised credits and wholesale banking. In a situation of liquidity and confidence crises, the market for such bonds dries up, essentially leading the failure of major banks.

Northern Rock, Brigleys and Bingley and HBOS failed primarily because of the reasons mentioned above.

Hence the problems in the UK are aggrevated to a larger extent as compared to the US.