The internationalisation of financial flows has meant that the assessment of risk reporting has recently become one of the most significant issues in financial markets. The findings of this study are analysed using decision-usefulness to enhance the understanding of the risk disclosures of UK banks. In particular, these findings have enhanced the understanding of risk categories, information richness, and the influence of societal discussion on the risk reporting of the banking sector. This study analyses risk disclosures in the annual reports of six UK banks (i.e. RBS, NatWest, Lloyds TSB, HBOS, and HSBC), between 1995 and 2010, and in three main areas, which are: risk category membership, information richness, and the intensity of societal discussion (on risks). Content analysis is developed in this study to investigate both longitudinal and intrasectoral aspects for interpreting the content of risk disclosures in annual reports. In addition, content analysis of the news coverage of UK newspapers is conducted by using the LexisNexis electronic database to analyse the association between volumes of longitudinal banking sector risk disclosures against the intensity of societal discussion as proxied by the frequency, by year, of relevant newspaper citations, and by risk category. The findings of this study show that credit risk is the most disclosed risk (by volume) for all banks and in all years. Almost all of the risks are disclosed with high information content (in both qualitative and quantitative aspects), although the proportion of quantitative disclosures has declined over time. In addition, the majority of risk disclosures are neutral news statements, while a small proportion of disclosures give a warning of bad news. Risk reporting has become proportionately more concerned with the narrative of opinion and perception rather than the reporting of facts and quantitative information. Both fact and quantitative information are found to be disclosed with decreasing proportions over time. The volume of overall risk disclosures has had a smooth increase over time; however, this trend conceals a volumetric increase with many switch points in many risk categories (particularly during 2005 to 2009). The causes of these switch points have been found to include the adoption of accounting standards in 2005 and the financial crisis of 2007. Moreover, the findings of the correlations between all of the risk categories disclosed and the number of newspaper citations are indicative that newspaper citations are positively associated with the disclosure of key strategic banking risks (i.e. risk management, credit risk, liquidity risk, market risk, equity risk, and insurance and investment risk). The pattern of volume fluctuation is most frequently observed in the disclosures of Lloyds TSB and HBOS. This study has found that the risk disclosures of all companies have increased over time. In particular, both the quantity of disclosures and the number of risk categories disclosed have increased, in both the overall analysis of all companies and in the analysis of the individual companies.

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The central contention of this thesis is that, in the post 1945 period, the British banking system limited the availability of finance to small firms. The concentrated and centralised nature of British banking induced financial repression as banks rationed credit to small firms, not purely in terms of interest rates, but also, and indeed mainly, in terms of supply. In a situation where banks enjoyed monopoly power over small and new firms, banks were unwilling to enter transactions with them as the cost of these transactions was high in relation to the returns, due to the centralised organisational structure of the banks. In the period previous to the one studied here, concentration had eliminated provincial banks, and the cartelized nature of British banking prevented the emergence of other local banks in the post-1945 period. These local banks would have had structures more suited to the reduction of information asymmetries, and therefore an interest in lending to small firms. The existence of a credit gap was exacerbated by credit restrictions devised by the British government in the post war period to control inflation and the balance of payments. These caused British banks to reduce the finance available to small firms. The argument presented here is that small firms in Britain suffered from credit restrictions more than they would have done if the banking system had been segmented, with other provincial banks available closer to local markets. The importance of local banks for the survival and development of small firms is illustrated by a comparison with the more differentiated Italian banking structure, in particular, the activity of two Piedmontese banks. In the chapters dedicated to Italian local banks, particular emphasis is given to their involvement with the regional economy and to the networks within the region that facilitate the exchange of both formal and informal information between small firms and banks, thus reducing information asymmetries and facilitating transactions.

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The global financial crisis had devastating effects on the financial system, economic growth and national debt of Western countries. The focus of this thesis is an examination of certain identifiable weaknesses in the corporate governance at UK banks which, it is posited, constituted an underlying cause of the crisis. It then considers the main regulatory responses to these identified weaknesses and assesses to what extent these have led to improvements in corporate governance at banks. This research is based on an examination of all the major failures at UK banks during and after the crisis, and of its related responses. In addition to UK responses, several solutions to the weaknesses identified at UK banks are also currently addressed through EU legislation and by the international Basel Committee. These are also reviewed. The principal conclusions are that: board effectiveness was low due to a lack of knowledge and of challenging of senior management; there was a culture placing growth and profit over risk management; and remuneration was inappropriately structured leading to unacceptable risk taking and scandals. It is further concluded that the mechanisms to limit the impact of a failure of a bank on its stakeholders, such as depositors and the taxpayer, were inadequate. A comparative case study of the financial crisis in Japan during the 1990s is also undertaken to consider whether, and to what extent, the Japanese regulatory response offers lessons to UK regulators and legislators. The principal finding is that comparative analysis of regulation and corporate governance at banks is problematic. Although there were similarities between the two financial crises and their impacts, the organisation and culture of the UK and Japanese banks is so different that different regulatory responses follow. Despite similarities in financial crises, different regulatory responses are more likely due to distinctive national contexts.

This thesis proposes a new open economy DSGE RBC model with financial intermediation. The objective is to provide a general equilibrium model that can simultaneously account for the behaviour of output and interest rate spreads by solely focusing on the real side of the economy. The standard open economy model is extended to incorporate banking industry, modelled on the production approach, and foreign debt elastic interest rate, which removes the models nonsationary features. The models ability to replicate the data is tested using indirect inference method on both stationary and nonstationary UK data. The same algorithm is used to estimate the parameter values using both types of time series data. This thesis provides the first estimates for the labour share in loan production and elasticity of foreign interest rates with respect to foreign debt obligations for UK economy. The model was retested using the parameter estimates. The results indicate that the proposed framework is able to account for the joint behaviour of output, the interest rate spread and the interest on foreign debt but it was rejected on other endogenous variables.

The marked disintegration of the UK banking system in 2008 led to significant Government ownership in two major banks: The Royal Bank of Scotland (RBS) and Lloyds Banking Group (LBG) (National Audit Office, 2009). The banks are termed ‘quasi-nationalised’ due to the retention of stock exchange listings alongside Government ownership The thesis offers a documentary analysis on the public accountability of these banks. The research themes are: - The impact of Government intervention on the accountability of the quasi-nationalised banks - The banking crisis through the lens of financial reporting for RBS and LBG - Newspaper reporting of the banking crisis in RBS and LBG A multiple theory framework is utilised in the study. Property rights (Alchian, 1974; Alchian and Demsetz, 1973; Demsetz, 1967) and agency theory (Fama, 1980; Jensen and Meckling, 1976) explore the implications of Government Intervention. Impression Management and Stigma (Goffman, 1968; Goffman, 1956a) are used to critique financial reporting since the crisis. Critical Discourse Analysis assesses newspaper reporting of the banks’ finances (Fairclough, 2010; Fairclough, 1995). Summary findings for the three research themes are as follows. Quasi-nationalisation has been a positive response to the banking crisis. Banks acknowledge they must consider societal responsibilities as well as corporate profits. Yet the increased accountability mechanisms have been difficult to define and enforce. Property rights theory applauds the retention of private sector scrutiny. Agency theory, however, identifies the muted disciplinary effects of the markets in the circumstances. The banks’ financial reporting gives an alternative perspective on the banking crisis. Both banks acknowledge their role in the crisis but simultaneously distance themselves from it. RBS highlights the virtues of a ‘new’ bank different from the failed one. LBG explains poor results through ‘market dislocation’. The statutory accounts themselves are relegated in favour of managerially defined pro forma numbers and promotional materials. In this way, the statutory numbers can be seen as part of the ‘dirty work’ (Goffman, 1956b) of the crisis. Using critical discourse analysis (Fairclough, 2010; Fairclough, 1995), findings are that newspaper reporting of the banks’ accounting results occurs across a broad spectrum of titles and articles. Headlines favour big numbers for impact. But constant focus on banking pay endures. The accounts provide an important counterpoint to the news context of the banks. Positively, accounting is portrayed as a neutral challenger to the public relations news process and fulfils democratic accountability. Critically, however, it is in the interests of papers to create and sustain media panics (Leach, 2006). The thesis responds to calls for literature on the financial crisis (British Accounting Review, 2012; Journal of Accounting and Public Policy, 2011; Arnold, 2009), multi-theoretical research in the public sector (Jacobs, 2012; Kurunmäki et al., 2003), linguistic theory in accounting (Evans, 2010) and accounting in the tabloids (Jeacle, 2012) as well as interpretive research in financial reporting (London School of Economics, 2011; Brennan and Solomon, 2008; Parker, 2007).

In the light of the global financial crisis of 2007 which is considered to be the worst since the Great Depression of the 1930s, it is evident that no bank is too big to fail. There have been a number of corporate failures in recent years, including instances in the United Kingdom. These events, therefore, motivated this study in terms of emphasising the need to apply financial distress prediction models to examine the performance of UK banks. This work aims at empirically examining and analysing the performance of UK retail banks amid the financial crisis, covering three periods: before, during and afterwards. In doing so, the accuracy of Altman‘s financial ratios of early warning statistical distress prediction models was examined. Both primary and secondary data were employed to find answers to the research questions. The first result indicated that Altman‘s ratios: leverage, solvency and turnover ratios significantly discriminated the three crisis periods. Yet, Altman‘s model had high misclassification error rate and less predictive power during the crisis than before and afterwards. With regards to the performance of banks, the result revealed that banks performed better in terms of profitability, liquidity and activity ratios for pre and post crisis than during the crisis. Additionally, researchers have become increasingly interested in linking marketing variables such as satisfaction, trust and loyalty to financial performance. While profitability ratio is commonly confirmed to be a significant predictor of performance, loyalty constructs are not generally assessed in this manner in the profit link framework. This implied that loyalty has not been shown to have a direct impact on financial performance. Hence, since both loyalty and profitability play vital roles to determine the success of banks, they should be fully considered before performance is established. In this thesis, an extension of past profit link research to include nonfinancial variables was considered. This research examined the link between satisfaction, trust and loyalty, and overall financial performance. The overall empirical findings provided evidence of a positive relationship of loyalty and levels of relative profitability. Nevertheless, satisfaction and trust were not statistically related to profitability in the UK retail banking sector.

Although there is an increasing interest in social sciences amongst policy makers in financial services and investment organisations, not enough is known about the way financial organisations and activities interact with their social environments. In particular, there is a need for more research into the way financial activities are integrated into broader social structures. This thesis will report on a comparative study analysing the practices of financial organisations and their employees in two very different social environments: the UK and Chile. From 38 in-depth interviews with financial practitioners in London, Edinburgh and Santiago de Chile about their job trajectories and experiences, it was possible to analyse the practices of financial organisations in the UK and Chile, with an emphasis on the way they interact with global financial trends and local distributions of power and resources. A sociological account of organisational processes such as recruitment, socialisation, staff allocation, promotion and organisation of work within firms in these countries allowed for description and analysis of the way firms’ practices are related to their social (structural, symbolic and institutional) contexts. The research shows that Chile’s position in the global financial market and local distribution of resources encourage more traditional organisational practices, especially in terms of recruitment, socialisation, staff allocation and promotion, as well as activities performed and the way services are provided. In the UK, on the other hand, all of the above-mentioned processes are more technical, formally designed and competitive.