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Context, Rationale and Consequences

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Part of the Palgrave Studies in Economic History book series (PEHS)

Abstract

This chapter provides an overview of the economic and industry context within which the London clearing banks operated. It argues that the need to maintain the stability and value of the pound sterling was a key factor in understanding the approach to regulation adopted, rather than the need to minimize the cost of government debt by the policy of financial repression. The chapter evaluates the argument that the nature of bank regulation led to parts of the financial and banking system (such as the euromarkets and the secondary—or fringe—banks) being too lightly, or even unregulated, and that this regulatory neglect contributed to the secondary banking crisis which broke in December 1973. Finally, it explores the regulatory, institutional and structural factors which stabilized banking by acting as counterweights to excessive risk-taking by the clearing banks.

Keywords

Financial repression Balance of payments on current account Secondary banking crisis Competition and Credit Control Risk in banking 

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Copyright information

© The Author(s) 2018

Authors and Affiliations

  1. 1.University of ReadingReadingUK

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