Narrow Banking, Real Estate, and Financial Stability in the UK, c.1870-2010
AbstractBanking in the UK was stable for more than a century after 1866.� Financial institutions were differentiated according to function.� The core banks did not engage in maturity transformation, but in managing a payments system for business.� Real estate was a potential source of instability due to high credit elasticity of demand and to long maturities, but credit was successfully rationed by building societies, who relied on the funds that their savers had actually withdrawn from consumption.� After 1945, credit rationing came under pressure from consumers and housebuyers.� Incremental liberalisations after 1971 released a tide of credit which created a property windfall economy.� Borrowers and lenders both prospered until the system collapsed under its own weight in 2007.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number Number 116.
Date of creation: 14 Jun 2013
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-BAN-2013-07-28 (Banking)
- NEP-HIS-2013-07-28 (Business, Economic & Financial History)
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