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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

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

Avner Offer

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199688661.003.0009

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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