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Market-Based Banking and the International Financial Crisis$
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Iain Hardie and David Howarth

Print publication date: 2013

Print ISBN-13: 9780199662289

Published to Oxford Scholarship Online: September 2013

DOI: 10.1093/acprof:oso/9780199662289.001.0001

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Market-Based Banking as the Worst of All Worlds: Illustrations from the United States and United Kingdom

Market-Based Banking as the Worst of All Worlds: Illustrations from the United States and United Kingdom

Chapter:
(p.56) 3 Market-Based Banking as the Worst of All Worlds: Illustrations from the United States and United Kingdom
Source:
Market-Based Banking and the International Financial Crisis
Author(s):

Iain Hardie

Sylvia Maxfield

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199662289.003.0003

This chapter considers market-based banking in the United States and United Kingdom, the two archetypal liberal market economies. We demonstrate both the extent of recent change in the two systems, and their clear differences. In the United States, market-based banking takes place largely in the parallel banking markets, while the United Kingdom is the clearest example of market-based banks. Using the United States and United Kingdom as examples of high levels of market-based banking, we explore the consequences of such developments. We examine the nature of exchange, information flows, liquidity and the locus of risk, to conclude that market-based banking demonstrates weaknesses of the two generally seen systems, market based and bank based, particularly in a tendency to opacity and the concentration of risk on a smaller number of financial institutions, without the strengths of either.

Keywords:   United States, United Kingdom, financial crisis, market-based banking, liberal market economies varieties of capitalism

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