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Do Banks Matter

Do Banks Matter. Bridget Rosewell Volterra Partners and GLA. Outline. What do banks do, what is their role in the economy Why this is likely to increase What is finance sector’s role in London especially Could we live without it? Answer - no. What do Banks do?.

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Do Banks Matter

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  1. Do Banks Matter Bridget Rosewell Volterra Partners and GLA

  2. Outline • What do banks do, what is their role in the economy • Why this is likely to increase • What is finance sector’s role in London especially • Could we live without it? • Answer - no

  3. What do Banks do? • When economic accounts were first devised, finance had no role, just an intermediary • Indeed in many modern models of the economy (including those used in central banks) money has no role • Interest costs are an intermediate cost, changing interest costs changes cost of investment and savings • So nothing much?

  4. What do Banks do? • Not just an intermediary but a manager of assets and balance sheets • Pensions, insurance, etc • Generating international business, a service to final consumers • Definitions in national accounts have changed as a result

  5. Recent contribution to Growth

  6. UK Financial Services • 2010 Financial Sector paid 11.2% of UK tax revenues • Largest sector paying corporation tax £5.6bn (though down from £12bn in 2007) • 3.5% of UK workforce generating £24.5bn of employment taxes • (PwC study)

  7. The structural deficit problem

  8. Government debt at exceptional levels Source: Public Finances First Release, ONS

  9. France and Germany more exposed to Greek debt than the UK (as of December 2010) Source: Bank for International Settlements

  10. Financial services indicators Source: Bank for International Settlements, London International Financial Futures and Options Exchange, London Metal exchange and London Stock Exchange

  11. Percentage of debt held abroad

  12. UK Banks are International

  13. Services matter to London exports...

  14. Sectoral Employment Data

  15. Conclusion • Financial services matter but have not been the main job creator • They do produce value, and taxes – not all the activity is measured • International asset management is going to continue to matter – and to grow

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