Banking in Crisis

Can the lessons of the past help us to prevent another banking collapse in the future? This is the first book to tell the story of the rise and fall of British banking stability over the past two centuries, shedding new light on why banking systems crash and on the factors underpinning banking stability. John Turner shows that there have only been two major banking crises in Britain during this time - the crises of 1825-6 and 2007-8. Although there were episodic bouts of instability in the interim, the banking system was crisis free. Why was the British banking system stable for such a long time? And, why did the British banking system implode in 2008? In answering these questions, the book explores the long-run evolution of bank regulation, the role of the Bank of England, bank rescues and the need to hold shareholders to account. 'Banking in Crisis combines the very best of serious academic scholarship and keen policy analysis. It should be required reading for anyone - expert and non-expert alike - who is interested in the past, present, and future of British banking.' Richard S. Grossman, Wesleyan University, Connecticut 'What makes for stable banking? Bankers are prone to gamble with depositors's money. What keeps them honest is a personal stake, or tight regulation. Turner shows that since 1825, stability required either the one or the other, and that relaxation of discipline, whatever its advantages, has placed the financial system at risk. The past worked for a long time, and the present doesn't.' Avner Offer, University of Oxford 'John Turner has done the community of banking scholars, regulators and policy makers a great service by writing an account of two centuries of British banking. It is timely, scholarly and most of all highly readable. History, is contextualised in the economic theory of banking making it a must read for students at all levels. Highly recommended.' Kent Matthews, Cardiff UniversityAcknowledgements; 1. Introduction: holding shareholders to account; 2. Banking instability and risk shifting; 3. The evolution of British banking structure and stability since 1800; 4. Major and minor British banking crises since 1800; 5. Banking stability, shareholder liability and bank capital; 6. Averting or creating banking crises? The lender of last resort and bank rescues; 7. Banking stability and bank regulation; 8. Restoring banking stability: policy and political economy; Bibliography; Index.