Present and evaluate the possible bank reforms emerging from the US Essay

Present and evaluate the possible bank reforms emerging from the US and the UK - Essay Example Now, when the crisis is within control and the economies of the US and the UK are showing signs of nascent recovery, the cries for reforms in the banking system are emerging from the affiliated concerns and institutions. Some of the proposed reforms are a step in the right direction. Still, all that is being said and done does not portend to achieve the expected results. Causes of the Banking Crisis The occurrence of crisis like situations within the US and the UK banking system owing to the embedded systemic weaknesses has been typically shocking in the current decade. Not to mention, the cost of such scenarios have been significantly high for the affected economies. Though, the causes and reasons impacting the banking system during the 2008-2009 recession have been to some extent, region specific. Still, some salient trends can be identified, that have been common to the UK and US banking system. First and foremost, the risky banking practices and the accompanying structural weakne sses in the financial system were bound to give way to a crisis like situation at some time or other (Turner 2008). ... It was an attitude of negligence on the part of the regulatory bodies that allowed the irresponsible bankers to manipulate an environment marred by ineffective market discipline (Turner 2008). This gave way to unsound corporate governance practices on the part of the banks and the customers who approached them for seeking loans. How Banking Crisis Contributed to Recession Actually experts have been predicting the collapse of the banking system much before the things went wrong. The unrealistic and unethical credit expansion by the American and the English financial institutions was a phenomenon that had been taking place since the last couple of years (Turner 2008). The irony was that even the Central Banks in the influenced countries failed to check this artificial credit expansion. All the instruments and mechanisms that facilitated this credit expansion were predominantly pegged on the real estate market in the US (Roberts 2008). As expected, as the real estate boom in the US came to a halt, the financial instruments backing it got worthless; giving was to caustic assets and the accompanying credit crunch that hit the world economy (Roberts 2008). The following oil price volatility made the things even worse (Turner 2008). Banking Reforms in the US The US government incorporated the lessons learnt from the subprime mortgage crisis into the envisaged banking reforms. These reforms not only intended to create new regulatory bodies with more teeth, but also planned to protect the interests of the customers. These reforms provided more power to the Federal Reserve thereby enabling it to better monitor the functioning of the financial institutions, and if required to takeover over a financial institution