Disadvantages of Bank Shares

Disadvantages of Bank Shares

Disadvantages of bank shares as an investment

(a) Banks are exposed to governmental economic policies with can restrict their volume of business (this is a credit squeeze) in limiting their lending powers by determining the percentage of advances to deposits (liquidity ratio).

(b) During a time of monetary restrictions the Government can require the banks to place special deposits with the Bank of England, thus further restricting credit.

(c) The increasing competition for deposits, the life-blood of a bank's business, from other institutions borrowing direct from the public.

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