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Banking crisis solutions old and new

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Author Info

  • Alistair Milne
  • Geoffrey E. Wood

Abstract

In 2007 Britain experienced its first run on a bank of any macroeconomic significance since 1866. This was not dealt with by the method that had maintained banking stability for so long: letting the bank fail but supplying abundant liquidity to the markets to prevent contagion. In this paper the authors examine why that traditional solution was not used and propose changes to Britain's deposit insurance system, to its bank insolvency regime, and in arrangements to allow customers access to banking services should their bank be closed-so that the traditional approach can once more be used to mitigate moral hazard.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2008)
Issue (Month): Sep ()
Pages: 517-530

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Handle: RePEc:fip:fedlrv:y:2008:i:sep:p:517-530:n:v.90no.5

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Related research

Keywords: Risk management ; Banks and banking;

References

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  1. Geoffrey Wood, 2000. "The Lender of Last Resort Reconsidered," Journal of Financial Services Research, Springer, vol. 18(2), pages 203-227, December.
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Cited by:
  1. Michael D. Bordo, 2008. "An Historical Perspective on the Crisis of 2007-2008," NBER Working Papers 14569, National Bureau of Economic Research, Inc.
  2. Murizah Osman Salleh & Aziz Jaafar & M. Shahid Ebrahim, 2011. "The Inhibition of Usury (Riba An-Nasi'ah) and the Economic Underdevelopment of the Muslim World," Working Papers 11002, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  3. Michael D. Bordo, 2009. "A Historical Perspective on the Crisis of 2007–08," Working Papers Central Bank of Chile 548, Central Bank of Chile.
  4. Phillip Anthony O’Hara, 2011. "International Subprime Crisis and Recession: Emerging Macroprudential, Monetary, Fiscal and Global Governance," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(1), pages 1-17, March.

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