Context, Rationale and Consequences

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


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.


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


Primary Sources

  1. Bank of England ArchiveGoogle Scholar
  2. G1/13: Governor’s Files: Various Bank Mergers and Amalgamations.Google Scholar
  3. Bishopsgate InstituteGoogle Scholar
  4. Parliamentary Profiles Archive—Lords 5/63A Barber of Wentbridge.Google Scholar
  5. Lloyds Banking Group ArchiveGoogle Scholar
  6. HO/S/Rep/8–19.Google Scholar
  7. HO/D/Boa/Age/26–29.Google Scholar
  8. London Metropolitan ArchivesGoogle Scholar
  9. MS30851: Chartered Institute of Bankers: Annual General Meetings and Other Public Meeting Minutes.Google Scholar
  10. MS32037: Committee of London Clearing Bankers and Chief Executive Officers’ Committee Minutes (2/7a and 2/7/1).Google Scholar
  11. Command PapersGoogle Scholar
  12. Committee on the Working of the Monetary System, Report, Cmnd. 827, August 1959.Google Scholar
  13. National Board for Prices and Incomes, Report No. 34, Bank Charges, Cmnd. 3292, May 1967.Google Scholar
  14. Committee to Review the Functioning of Financial Institutions, Report, Cmnd. 7937, June 1980.Google Scholar
  15. Newspapers and MagazinesGoogle Scholar
  16. The Economist. Google Scholar

Secondary Sources

  1. Books and ArticlesGoogle Scholar
  2. Aikman, David, Oliver Bush, and Alan M. Taylor. “Monetary Versus Macroprudential Policies: Causal Impacts of Interest Rates and Credit Controls in the Era of the Radcliffe Report, Working Paper 22380.” NBER Working Paper Series, National Bureau of Economic Research, June 2016. 1–43.Google Scholar
  3. Akerlof, George A., and Robert Shiller, J. Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism. 9th ed. Princeton: Princeton University Press, 2009. Reprint, 2010.Google Scholar
  4. Allen, William A. Monetary Policy and Financial Repression in Britain, 1951–59. Basingstoke: Palgrave Macmillan, 2014.Google Scholar
  5. Anginer, Deniz, Asli Demirgüç-Kunt, and Min Zhu. “How Does Bank Competition Affect Systemic Stability? World Bank Policy Working Paper Number 5981.” World Bank Policy Research Working Papers, The World Bank, February 2012. 1–39.Google Scholar
  6. Artis, M. J. “Monetary Policy Part II.” In British Economic Policy 1960–74, edited by F. T. Blackaby, 258–303. Cambridge: Cambridge University Press, 1978.Google Scholar
  7. Barth, James R., Gerard Caprio Jr., and Ross Levine. “Bank Regulation and Supervision in 180 Countries from 1999 to 2011, Working Paper 18733.” NBER Working Paper Series, National Bureau of Economic Research, January 2013. 1–110.Google Scholar
  8. Bátiz-Lazo, Bernardo. “Emergence and Evolution of ATM Networks in the UK, 1967–2000.” Business History 51, no. 1 (2009): 1–27.CrossRefGoogle Scholar
  9. Beck, Thorsten, Asli Demirgüç-Kunt, and Ross Levine. “Bank Concentration and Crises, Working Paper 9921.” NBER Working Paper Series, National Bureau of Economic Research, 2003. 1–41.Google Scholar
  10. Beck, Thorsten, Asli Demirgüç-Kunt, and Ross Levine. “Bank Concentration, Competition, and Crises: First Results.” Journal of Banking & Finance 30, (2006). Accessed 30 March 2017. Scholar
  11. Beck, Thorsten, Olivier De Jonghe, and Glenn Schepens. “Bank Competition and Stability: Cross-Country Heterogeneity.” Journal of Financial Intermediation 22, no. 2 (2013): 218–44. Accessed 24 March 2017. Scholar
  12. Berger, Allen N., Leora F. Klapper, and Rima Turk-Ariss. “Bank Competition and Financial Stability, World Bank Policy Research Working Paper 4696.” World Bank Policy Research Working Papers, The World Bank, August 2008. 1–32.Google Scholar
  13. Boyd, John H., Gianni De Nicolò, and Abu M. Jalal. “Bank Risk-Taking and Competition Revisited: New Theory and New Evidence, WP/06/297.” IMF Working Papers, December 2006. 1–49.Google Scholar
  14. Capie, Forrest, and Mark Billings. “Profitability in English Banking in the Twentieth Century.” European Review of Economic History 5, no. 3 (2001): 367–401.CrossRefGoogle Scholar
  15. Claessens, Stijn, and Luc Laeven. “What Drives Bank Competition? Some International Evidence.” Journal of Money, Credit and Banking 36, no. 3, Part 2 (2003): 563–83.CrossRefGoogle Scholar
  16. Claessens, Stijn, and M. Ayhan Kose. “Financial Crises: Explanations, Types, and Implications, WP/13/28.” IMF Working Papers, International Monetary Fund, January 2013. 1–65.Google Scholar
  17. de-Ramon, Sebastian J. A., and Michael Straughan. “Measuring Competition in the UK Deposit-Taking Sector, Staff Working Paper No. 631.” Staff Working Papers, Bank of England, December 2016. 1–42.Google Scholar
  18. Fear, Jeffrey. “Cartels.” In The Oxford Handbook of Business History, edited by Geoffrey G. Jones and Jonathan Zeitlin, 1–18. Oxford: Oxford University Press, September 2009. Accessed 26 October 2014.
  19. Goodhart, Charles A. E. “Competition and Credit Control: Some Personal Reflections.” Financial History Review 22, no. 2 (2015): 235–46.CrossRefGoogle Scholar
  20. Gorton, Gary B. “The Quiet Period and Its End.” In Misunderstanding Financial Crises: Why We Don’t See Them Coming, 125–33. New York, NY: Oxford University Press, 2012.Google Scholar
  21. Griffiths, Brian. Competition in Banking. London: Institute of Economic Affairs, 1970.Google Scholar
  22. Heffernan, Sheila. Modern Banking. Chichester: Wiley, 2009.Google Scholar
  23. Holmes, A. R., and Edwin Green. Midland: 150 Years of Banking Business. London: BT Batsford Ltd., 1986.Google Scholar
  24. Keeley, Michael C. “Deposit Insurance, Risk, and Market Power in Banking.” The American Economic Review 80, no. 5 (December 1990): 1183–1200.Google Scholar
  25. Kynaston, David. Austerity Britain: 1945–1951. London: Bloomsbury Publishing plc, 2008.Google Scholar
  26. Laeven, Luc, Lev Ratnovski, and Hui Tong. “Bank Size and Systemic Risk, SDN/14/04.” IMF Staff Discussion Notes, International Monetary Fund, May 2014. 1–33.CrossRefGoogle Scholar
  27. MacLeod, Rory. “The Promise of Full Employment.” In War and Social Change: British Society in the Second World War, edited by Harold L. Smith. Manchester: Manchester University Press, 1986.Google Scholar
  28. Merton, Robert K. “The Unanticipated Consequences of Purposive Social Action.” American Sociological Review 1, no. 6 (December 1936): 894–904.CrossRefGoogle Scholar
  29. Michie, Ranald C. “Suppression, Regulation, and Evasion: 1939–70.” In The Global Securities Market: A History, 205–52. Oxford: Oxford University Press, 2006.CrossRefGoogle Scholar
  30. Newton, Lucy. “Government, the Banks and Industry in Inter-War Britain.” In Business and Politics in Europe, 1900–1970, edited by Terry Gourvish, 145–68. Cambridge: Cambridge University Press, 2003.Google Scholar
  31. The Organisation for Economic Co-operation and Development. Bank Competition and Financial Stability. OECD Publishing, 2011. Accessed 1 August 2018.
  32. Reid, Margaret. “The Dash for Growth—And Its Consequences.” In The Secondary Banking Crisis, 1973–75: Its Causes and Course, 70–85. London: Macmillan, 1982.CrossRefGoogle Scholar
  33. Reid, Margaret. Secondary Banking Crisis, 1973–75: Its Causes and Course. London: Macmillan, 1982.Google Scholar
  34. Revell, J. R. S. Costs and Margins in Banking: An International Survey. Edited by Organisation for Economic Co-operation and Development. Paris: Organisation for Economic Co-operation and Development, 1980.Google Scholar
  35. Sampson, Anthony. Anatomy of Britain. London: Hodder and Stoughton, 1962.Google Scholar
  36. Schenk, Catherine. “Rogue Trading at Lloyds Bank International, 1974: Operational Risk in Volatile Markets.” Business History Review 91, no. 1 (2017): 105–28.Google Scholar
  37. Schenk, Catherine R. “Britain in the World Economy.” In A Companion to Contemporary Britain, 1939–2000, edited by Paul Addison and Harriet Jones, 463–81. Oxford: Blackwell, 2007.CrossRefGoogle Scholar
  38. Schooner, Heidi Mandanis, and Michael Taylor. “Convergence and Competition: The Case of Bank Regulation in Britain and the United States.” Michigan Journal of International Law 20, no. 4 (Summer 1999): 595–656.Google Scholar
  39. Tew, J. H. B. “Monetary Policy Part I.” In British Economic Policy 1960–74, edited by F. T. Blackaby, 218–57. Cambridge: Cambridge University Press, 1978.Google Scholar
  40. Tomlinson, Jim. “Economic Policy.” In The Cambridge Economic History of Modern Britain Volume 3: Structural Change and Growth, 1939–2000, edited by Roderick Floud and Paul Johnson, 189–212. Cambridge: Cambridge University Press, 2008.Google Scholar
  41. Vives, Xavier. “Competition and Stability in Banking, WP-852.” Working Papers, IESE Business School, University of Navarra, April 2010. 2–55.Google Scholar
  42. Watson, Katherine. “The Financial Services Sector Since 1945.” In The Cambridge Economic History of Modern Britain Volume 3: Structural Change and Growth, 1939–2000, edited by Roderick Floud and Paul Johnson, 167–88. Cambridge: Cambridge University Press, March 2008. Accessed 19 September 2017.
  43. Wilks, Stephen. In the Public Interest: Competition Policy and the Monopolies and Mergers Commission. Manchester: Manchester University Press, 1999.Google Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  1. 1.University of ReadingReadingUK

Personalised recommendations