Northern Rock seen as first test of UK's tripartite regulatory framework - Fitch |
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Mon, 22 Oct 2007 11:38
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MUMBAI (Thomson Financial) - Fitch Ratings said the Northern Rock case is the first big test of the UK's tripartite regulatory framework, adding the first bank run in the UK for 140 years may result in a review of the structure.The tripartite regulatory structure divides the responsibilities for regulating banks and the wider financial system between the Treasury, the Bank and the Financial Services Authority.The rating agency said the major UK banks are adequately capitalised, though regulatory capital ratios for some banks tend to be weaker than in most European systems.Fitch has the highest Banking System Indicator score of 'A' to the UK banking system.It views a high-quality accounting and disclosure regime, good insolvency arrangements, efficient payment and settlement systems and flexible labour laws as the banking system's strengths.Further, the banking sector as a whole has reported record profits in the past few years as a result of rising business volumes and increasing fee generation from the sale of a greater range of products.The rating agency said strong corporate and wholesale businesses have increasingly compensated for the more sluggish UK retail business, adding cost control remains an important part of bank performance.Fitch believes there is little scope left for significant consolidation within the UK banking sector, although small institutions might still make attractive targets for the large ones.Still, it views the UK as an attractive market for international banks.It attributes increases in banks' loan impairment charges in respect of unsecured retail portfolios in the past couple of years, in part, to an increasing number of individual voluntary arrangements and bankruptcies. However, the numbers are now stabilising, it said.TFN.newsdesk@thomson.comrku/ranCOPYRIGHTCopyright Thomson Financial News Limited 2007. All rights reserved.The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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Northern Rock 'A-' unchanged on equity injection from Virgin-led consortium -S&P 