Ensuring financial stability
Financial markets are critical to the well-being of all citizens and the success of all businesses in this country. They also strongly influence economic growth and development across the world. They are the core mechanism for allocating resources efficiently in an economy and a key driver of productivity, growth and opportunities. Unstable markets can therefore affect everyone.
Since the world economy was hit by a global credit shock in mid-2007, global financial markets have suffered a sustained period of stress and instability. The intensification of the financial market stress into the worst global financial crisis for generations delivered a severe blow to an already weakened economy, leading to a global downturn.
The Government has already taken decisive action to prevent the collapse of the financial system and support the wider economy through:
- targeted action for individual banks and building societies, such as Northern Rock and Bradford & Bingley; and
- a comprehensive system-wide response, including action to ensure liquidity, strengthen bank capital, guarantee certain wholesale funding, deal with impaired assets, and increase lending in the economy.
Budget 2009 introduces the Government's view of action required to renew financial markets for the future. Before the summer, the Government will set out its approach to renewing financial markets for the longer-term. The paper will set out:
- key elements of the Government's approach to the future of the financial markets;
- steps already taken to achieve this approach, including work through the G20 and the Banking Act 2009;
- renewing financial regulation, reducing the impact of bank failure, protecting and supporting consumers, improving the way capital markets work, and strengthening regulators and the international regulatory framework.