The UK Financial Crisis and Banking Scandals In September 2007 the UK banking sector began to show symptoms of the financial crisis which began in America in 2006 Northern Rock was in trouble and had to ask the Bank of England for help. As the news spread, customers began queuing around the block to collect their money. In 2008 Northern Rock was nationalized and in 2012 it was bought by Virgin Money. Today the banking sector seems to be on the road to recovery. But there was no shortage of controversy along that road. I think of Libor, excessive bonuses, payment protection, mis-selling and currency manipulation, to name a few. But before we look at them in a little more detail, let's quickly recap the financial crisis and the effects it had on UK banks. . To do this we must start with the United States. In 2006, American banks began to experience a rapid rate of default on subprime mortgages. These mortgages were given to high-risk customers, many of whom didn't understand what they were getting into and had trouble repaying the loans. Banks must take some responsibility for their loose lending principles. For example, they were happy to lend to NINJAs, customers with no income, jobs or assets. And they also offered "teaser" mortgages, with an initially low interest rate that was sharply increased a few months later. With such a default rate, home prices fell substantially and the average American became poorer, with many homeless. Banks sought to mitigate risk by selling packages of mortgages to secondary buyers such as investment banks. In a process known as securitization, those secondary buyers could once again repackage the mortgages and sell them as b... halves of paper... at exchange rates. Forex traders at several banks allegedly colluded to set a daily reference rate used by corporate clients. Again, this is something that could have been going on for a decade or more. As a result, the affected banks are under investigation and several traders have been suspended. Mark Carney, governor of the Bank of England, told the Treasury select committee in March that the allegations were "as serious as Libor, if not more so". These are just a selection of questionable banking practices. Crimes involving money laundering, misselling of credit card insurance, illicit trading and insider trading – the list goes on – have also occurred in the past five years. If money wasn't devalued by inflation, I would simply convert all my assets into cash and put them under the mattress. Maybe I'll be offered a secured mortgage obligation instead - who could resist?