... big five, which are HSBC Bank UK, Royal Bank of Scotland, Barclays, Halifax Bank of Scotland and Lloyds TSB, hence making strong concentration and indicating lack of competition in UK banking sector (Cruickshank Report, 2000). Secondly, after the hard time in the early 1990s, UK banks continued to perform well at their profitability. In 2004, the big UK banks delivered a return on equity to shareholders of 16 per cent, substantially above the average return of FTSE listed companies (http://www.neweconomics.org). Such high market concentration and stable return performance can evident that the UK bank sector is a low risk sector. The six companies within the sector are: Royal Bank of Scotland Group plc, Lloyds TSB Group plc, Barclays PLC, HSBC Holdings plc, HBOS PLC and Alliance & Leicester plc. Expect return Standard deviation Royal Bank of Scotland 0.07 0.02 Lloyds TSB 0.07 0.02 Barclays 0.13 0.026 HSBC Holdings 0.02 0.02 HBOS 0.13 0.02 Alliance & Leicester plc 0.07 0.03 Figure 1 Illustration of the UK bank sector portfolios Table ...

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