The role of commercial banks in the development of economy mohsin hassan alvi

Impact of ROA on Economic Environment
The financial ratios of banks play a significant role in determining the profitability and their relationship with economy. Internally, capital stability, cost and expenses, assets and liquidity leaves a substantial impact on banks’ profitability. The internal determinants has the power to fluctuate external factors of economical environment; such as economic development, inflation, market prices and interest rates (Gungor, 2007). There are varieties of commercial banks are situated in United Kingdom, included domestic and multi-national banks. The process of multi-national banking has been changed over the time and several external factors introduced with the purpose of influencing consumer experiences of multi-national banks. It was argued about the international banking hub in New York, Tokyo and London, whereas it also showed the critical issues regarding international banking in Middle East, Europe, United State of America, Canada and Latin America (Jones 1991). One of the reasons to reduce barrier to access in financial market is to provide opportunity to financial intermediaries and reduce financial distress. The role of banks was very critical in providing ease to local populations, on the other hand, firms in industrial group has a great relationship to suppliers, customer and financial institutions like banks (Hoshi, Kashyap & Scharfstein 1990). Furthermore, organizations with fair trade showed their concern in providing best quality of services, products and client group. European Union declared the subsidy program for the enterprises and firms to help the exchange system (LeClair 2002).

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   Balance of Trade
   

A stabilized and balanced trade system in a country facilitates in improving the economical status. More financial development leads to achieving equilibrium in import and export processes. Tangible assets and return on assets provide opportunity to strengthen the export as well as useful import internationally (Hur, Raj, and Riyanto, 2006). Previous studies suggested that the foreign trade of United Kingdom was improved due to standards, whereas it reduced the barrier to entry in the market. The performance increase drastically in several regions of United Kingdom, as a result of it, national production increased that facilitated the industries and declined imports (Swann, Temple & Shurmer 1996). Some studies argued over the poor Intra-Industry trade (IIT) in United Kingdom. Greenway, Hine & Milner (1994) concluded that Intra-Industry trade played a vital role in formation of market but unfortunately the U.K. regions avoided this factor. It has been explained as well that the vertical Intra-Industry trade (IIT) is far more important than the horizontal Intra-Industry trade (IIT). Backus, Kehoe & Kydland (1992) investigated the relation between international data sets of two countries. It was concluded that past movements in the fluctuation of balance of trade between countries was positive, whereas currents and future fluctuation in balance of trade was reported positively.

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