Essays on Enterprise and Social Responsibility Assignment

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The paper "Enterprise and Social Responsibility" is a great example of a business assignment.   The financial institutions in the case are adversely affected since they are losing money through the risk-averse policies that they used to conduct their business leading to the financial crisis. British financial institutions like Bradford, Bingley and Northern Rock were emulating a similar trend exhibited in America such as giving 125% mortgages and granting loans only based on self-certified income declarations. Banks became persistently risk-averse lending out up to forty times the amount held by them in terms of deposits.

The situation was made worse with rash diversification and acquisition policies. Morgan Chase Bank was fined about £ 527 million for failure in culture and control following the loss of £ 4 billion by London traders. Fines harm banks. Banks made losses in forms bad debts that comprised of loads that could not be recovered. Taxpayers Taxpayers have been negatively affected since the state was forced to provide up to £ 70 billion to provide financial support to UK banks and in an effort to mitigate the collapse of the banking sector. The money that the government used is taxes from the taxpayers.

In a desperate move to help the banking sector recover its stability, the UK government has taken liabilities that have the ability to rise to trillion pounds and be footed by higher taxation as well as cuts in public expenditure which would take a long time. There is partial state ownership via increased government funding. The government owns 90% of RBS and is the major shareholder in TSB. This is enabled through the taxpayers’ contributions in forms of taxes and other levies.

The taxpayers have suffered the following mistakes made in the banking industry. Shareholders The shareholders have lost their investments or its value decline to the lowest degree. Shareholders in the affected banking institutions are displeased with the prevailing situation. The value of shares of Northern Rock has dwindled to almost worthless and the share prices of major banks affected adversely. Depositors/consumers The depositors feared they will lose their hard-earned income. The consumers were misled into buying financial packages that were risky. Mis-selling of financial products like complex interest rate swaps extended to small businesses as well as manipulation of LIBOR by various retail banks in the UK.

As rumours about the failing banking system spread individuals and companies started to queue up to close their accounts. In case a bank fails in the UK, it will lead to loss of confidence by the public in the banking system and subsequent huge withdrawals of their deposits. Both small and large businesses are complaining of banks recalling their loans and unwillingness to offer new finance in spite of customer credit being available.

Some of the clients offered credit were unable to pay up the loans. Employees The employers were entangled in the crisis situation. The employees were motivated by the bonuses they were getting from getting clients to borrow more. The bank managers became obsessed with bank targets linked to very high bonuses and started to ignore risk assessment in favour of attaining sales targets in order to maximize their bonuses after attaining the targets. Failure of the banking sector led to a loss of jobs as some banks closed shop.


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