British financial system

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Publish Date: 2005-12-01
Features: The fourth edition of The British Financial System has been fully revised and updated, comprehensively interpreting the operation and influencing factors of the British financial system, and providing incisive elaboration on the new developments of major theories such as asymmetric information theory and the efficient market hypothesis, offering readers a theoretical analysis framework. The book covers new content including the new framework for prudent regulation, the new framework for monetary policy operations and a comparison with the European Central Bank, Basel Capital Agreement II, and more. Case studies such as Fair Life, Barings Bank, and International Commercial Credit Bank are integrated throughout the book, guiding readers to delve into the causes of failures and lessons learned from various financial institutions. This book is a classic economics textbook by Manchester University Press and has been rated five stars by readers on Amazon. It is suitable for graduate students in finance, economics, and other related fields, as well as anyone interested in the British financial system.
[Preface] Translator's Preface (I) In November 1986, while I was a graduate student at the Graduate School of the People's Bank of China (PBOC), I accompanied a PBOC delegation on a visit to the Bank of England and its Manchester branch, serving as the translator for the group. The delegation stayed in the UK for two weeks. At that time, it was shortly after the "Big Bang" in the British securities market, and the delegation visited the London Stock Exchange and the London International Financial Futures and Options Exchange with great interest. The heads of the two exchanges introduced us in detail to the background and content of the transformation of the British securities market. This visit gave me the opportunity to systematically understand the characteristics and evolution of the British monetary policy and financial system after World War II. Upon returning, I wrote an article on the "Big Bang" published in the journal of the PBOC Graduate School. Later, I also completed my graduate thesis titled Monetary Policy in Britain During Thatcher's Reign. That visit sparked my enduring interest in the British monetary policy and financial system. Over the years, I have closely followed the development of the British monetary policy and financial system. In the early 1990s, while working at the Chinese Executive Director's Office of the International Monetary Fund (IMF), I was responsible for economic and financial research on European countries, including the UK. After returning, I worked at the International Department of the PBOC, overseeing research on the global economy and finance, as well as the U.S. economy and monetary policy. Among these, the British economy, finance, and the Bank of England's monetary policy remained my favorite subjects to track and analyze. Over the years, I have always wanted to translate a comprehensive and systematic book on the British financial system. I was already familiar with the excellent textbook The British Financial System: Theory and Practice (Third Edition) co-authored by Dr. Baker and Professor Thompson. One day in May 2004, my friend Dr. Wang Yi from the Statistics Department of the PBOC asked if I was interested and had the time to translate a book on the British financial system, which had just been published in 2004. Later, I learned that the book was actually the new fourth edition of The British Financial System: Theory and Practice by Dr. Baker and Professor Thompson. I agreed almost without hesitation. After more than six months of effort, especially overcoming difficulties such as overlapping with other translation and manuscript commitments, this 375-page The British Financial System was finally completed. When I finished translating the last chart, I truly felt a sense of relief.
(II) Anyone with experience in professional English-Chinese translation may agree that one of the main challenges in such work is to fully grasp the professional terminology and vocabulary of the original text and translate them accurately and appropriately into Chinese, or to choose the most suitable translation from multiple options. In the process of translating The British Financial System, a textbook covering many fields of finance, the translator encountered numerous such issues. Here, I will take the word "system" in "financial system" as an example. The English word "system" has multiple meanings, such as system, framework, institution, mechanism, method, order, etc. Among those related to "financial," there are generally four terms: "system," "framework," "institution," and "mechanism." Many people translate "financial system" as "financial institution," "financial mechanism," "financial framework," or "financial system," but clearly, the most appropriate translation depends on the content of the book, the definition of the term, and the specific context or context. First, let's see how the authors define "financial system" in the book. The authors define "financial system" as "a set of markets and institutions that provide financing and various financial services" (see Chapter 18). I believe this definition is both accurate and skillfully and vividly reflects the connotation of the "financial system" to be elaborated in the book. The use of the word "set" is particularly brilliant and excellent, because markets naturally refer to various financial markets, and institutions naturally refer to various financial institutions. All the financial markets and institutions that constitute the "financial system" are "elements" of the "financial system" set. Based on this definition, imagine if "financial system" were translated as "financial institution" or "financial mechanism." Clearly, it would be difficult to express the connotation of the authors' definition of "financial system." After careful consideration, I believe "financial system" is the most appropriate translation, because the Chinese word "system" refers to "an integrated whole formed by the interconnection of several related things or certain concepts" (Modern Chinese Dictionary, 2005, 5th edition). This is better than the translation "financial system," because the Chinese word "system" emphasizes "an integrated whole formed by the arrangement of similar things according to certain relationships" (Modern Chinese Dictionary, 2005, 5th edition), rather than "an integrated whole formed by the interconnection of related things." It can be said that the content and structure of the book are completely consistent with the definition of "financial system" by the authors. Therefore, I chose to translate the title as The British Financial System.
(III) As the authors mentioned in the preface to the Chinese edition, this is a book that comprehensively and systematically elaborates on various financial systems against the backdrop of the British financial system. The greatest feature of this book is that it is a comprehensive textbook that integrates the development of the British financial system with the essence of finance. In other words, the main line of the book is a comprehensive and systematic elaboration and analysis of the structural characteristics and evolution process of the British financial system. At the same time, the authors skillfully "embed" some basic frameworks, concepts, and principles of economics and finance, as well as the latest developments in their theories, into the elaboration and analysis, thereby constructing an integrated framework of "theory and practice." It is particularly worth mentioning that when dealing with important financial issues and categories, such as the efficient market hypothesis, the theory and empirical analysis of the term structure of interest rates, behavioral finance, central bank theory, risk management, and financial regulation, the authors pay great attention to necessary literature reviews (Literature Survey). While teaching financial knowledge, resolving financial puzzles, and "narrating" all aspects of the British financial system to readers (students), the authors not only demonstrate good academic habits and norms to readers but also enable readers (students) to unconsciously feel as if they are listening to lectures from renowned professors in the classroom. The book also includes a large number of carefully selected charts, examples, and appropriate case studies, adding color to the book and effectively enhancing its explanatory power.
(IV) Since the early 1980s, the British financial system has indeed undergone tremendous changes. Not only has the structure and operation of the British financial markets undergone revolutionary changes, but the monetary policy framework and financial regulation system and model in the UK have also undergone fundamental changes. Especially, the reforms in the UK's monetary policy framework and financial regulation model have earned the reputation of leading the new trend of global financial policy and regulation, exerting a significant influence on the choice of monetary policy frameworks and financial regulation models in many countries since the second half of the 1990s. At the same time, they are also the best proof of the fruitful results of financial innovation in the UK. In recent years, the UK's achievements in establishing financial stability theory, policy frameworks, and practices have been highly praised by the international community. The International Monetary Fund has praised the UK's financial stability policy framework as being ahead of the world in many aspects. In Section 2.7 of The British Financial System, Dr. Baker and Professor Thompson borrow an analytical framework established by Llewellyn (1985, 1991) to understand the causes of changes in the British financial system, namely analyzing the changes in a country's financial system from the perspective of changes in market environments, changes in the asset portfolio preferences of users of financial intermediation services, and changes in the preferences and constraints of suppliers of financial intermediation services. This analytical framework, together with the economic model established in Chapter of the book for analyzing the main functions of the financial system, can form a good combined analytical framework of dynamics and statics based on microeconomic analysis. In the remaining chapters of the book, the authors basically follow this comprehensive analytical framework to elaborate and analyze the British financial system and its changes. When we encounter basic microeconomic concepts such as "preferences" and "constraints" in the elaboration and analysis in the book, readers who have studied microeconomics will naturally connect the issues discussed in the book with microeconomic theory to think about financial issues, thereby establishing a solid economic foundation for understanding various financial system issues. This is rarely seen in general works on a country's financial system. In many aspects, the book can be said to have gone beyond the scope of a basic textbook on the British financial system, becoming a comprehensive work on British financial system issues that integrates the research achievements and views of many scholars (including the authors themselves) on various aspects. If one were to ask about the shortcomings or areas for improvement of the book, I could only say that the authors may not have included the achievements and contributions of the UK in financial stability theory, policy, and practice in recent years. This might be an unavoidable regret. Although the authors mention the development of the UK's financial regulation system and construction in recent years, financial stability and financial regulation are after all two different concepts and categories. Financial stability issues should undoubtedly be an indispensable part of the study of financial system issues (because financial stability mainly refers to the stability of the financial system), and more so, a major macroeconomic and financial perspective that financial authorities (mainly central banks) should pay close attention to. In recent years, the Bank of England has not only effectively promoted and deepened the understanding of financial stability issues among British financial authorities and the whole society, forming effective financial stability policies, which are extremely important for maintaining British financial stability, but also advanced research on financial stability theory and policy globally. The Bank of England has a strong research team and has achieved fruitful and notable results in financial stability theory and policy research. I believe that in a few years, the authors will definitely add content on this aspect in the fifth edition of the book. At that time, the authors will be very proud to share the achievements and experience of the UK in financial stability theory and practice with the world.
(V) The process of translating this book was also a good learning process. This learning is reflected not only in the translator's "thorough chewing" of the book during the translation process but also in the extensive reading and reference of relevant Chinese and English reference books and tools for the translation. If this Chinese translation of the book can help interested readers, especially practitioners, researchers, and regulators in China's financial industry, to more comprehensively and deeply understand the evolution and development of the contemporary British financial system, the characteristics and interconnections of the British financial markets and institutions, the monetary policy framework and financial regulation system of the UK, and to draw useful lessons from them, I will feel extremely gratified. In addition to thanking Dr. Wang Yi for strongly recommending me to translate this excellent textbook, I would like to specially thank Ms. Gu Binghong from China Financial Publishing House as the chief editor of the Chinese translation of this book. As a rigorous and conscientious reviewer of the translation, she raised reasonable questions and insightful suggestions on the understanding and translation of some terms in the translation. Her sense of responsibility and professionalism deeply impressed me. Due to the tight schedule, despite my best efforts, the translation is not perfect, and errors and shortcomings are inevitable. I sincerely apologize to the readers for any mistakes and shortcomings in the translation and welcome your valuable comments and suggestions.