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British Financial Crises since 1825$
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Nicholas Dimsdale and Anthony Hotson

Print publication date: 2014

Print ISBN-13: 9780199688661

Published to Oxford Scholarship Online: November 2014

DOI: 10.1093/acprof:oso/9780199688661.001.0001

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Narrow Banking, Real Estate, and Financial Stability in the UK c.1870–2010

Narrow Banking, Real Estate, and Financial Stability in the UK c.1870–2010

(p.158) 9 Narrow Banking, Real Estate, and Financial Stability in the UK c.1870–2010
British Financial Crises since 1825

Avner Offer

Oxford University Press

This chapter argues that Britain’s era of banking stability from 1870 to 1970 was the exception rather than the rule, and that functional specialization played a key role. High Street banks with responsibility for operating the payments mechanism were not significantly exposed to the risks of longer-term lending, notably property-related lending. Offer sees the deregulatory package, known as Competition and Credit Control, launched in 1971 as the start of a process that led to universal banking. The liberalized credit system increased funds for house purchase and supported a house price boom. In the financial crisis of 2007–8, lending secured on residential and commercial property rendered banks vulnerable, particularly if financed by short-term borrowing.

Keywords:   mortgage, home finance, property, credit, maturity transformation, specialization

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