[Role of Central Bank during Recession: In Context of Bank of England]

by

Acknowledgement

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Abstract

In this paper we provide the critical evaluation of monetary policy, financial sector partners and Bank of England policy in United Kingdom during and after recent financial crisis. We find, in particular, that prudential supervision failed to predict depth of crisis, and although they expressed some concerns, if not taken before it was taken (partly due to lack of prudential levers). During crisis, making interest rate may be unduly delayed, while quantitative easing policy could have been more effective if focused on private sector assets, and bank rescue strategy focused too little on implications for competition. Exit strategies on horizon yet, but it is essential to be well designed to avoid risks of inflation and moral hazard on one hand, and new recession and credit crunch on other. The successful return to growth is financial sector and economy to work well together, for example in relation to housing market, investment and banking and financial market conditions, including potential impact of regulatory reforms . Are some potential difficulties, including overvaluation of prices for houses, commercial banks' losses on property potential, possible funding difficulties for banks and economic policy adjustment. All this at the risk point of current credit crunch could hinder growth in coming years.

Table of Contents

ABSTRACT1

CHAPTER I: INTRODUCTION4

Background4

The Policy in Period before Crisis4

Monetary Policy4

Prudential Policy5

CHAPTER II: LITERATURE REVIEW9

Easing policies during crisis9

Interest rate policy9

Liquidity policy10

Lender of last resort13

Bank recapitalisations15

Quantitative Easing17

CHAPTER III: METHODOLOGY22

CHAPTER IV: DISCUSSION23

Exit strategies23

Interest rate policy23

Liquidity policy24

Lender of last resort and bailouts26

Quantitative Easing28

Time Of Exit Strategies28

Scope for return to growth29

UK housing market29

Investment And Financial Terms31

Performance of UK financial services sector34

Financial Services Reform37

Impact Of Macro-Prudential Regulation39

CHAPTER V: CONCLUSIONS44

REFERENCES46

APPENDIX51

Role of Central Bank during Recession: In Context of Bank of England

Chapter I: Introduction

Background

Banks today, plays an important role in economy of the country. Central Bank of the country has primary role of supervising commercial banks and other financial institutions in an economy. It has great responsibility of formulating monetary policy in the country as well as maintaining financial stability in economy. Current situation of global recession following credit crisis and its dramatic effects on world's largest economies like U.S. and UK has increased role of central banks in economy of any country. This research tends to analyze central bank's role in stabilizing economic situation of the country through management of monetary and fiscal policy of the country along with monitoring functions of commercial and other types of banks in that economy.

UK has had the turbulent recession, emerging at time of writing with the very ...