In a lively and energetic talk, Professor Ranald Michie provided those in attendance at the Tipping Points Conference with a fresh insight into the financial turmoil that has recently engulfed the British banking sector.
Looking first at some of the most prominent explanations that have been put forward by the press and politicians, Professor Michie sought to dispel some of the more common myths that have built up around the 2007-08 banking crisis. In particular, he sought to pour cold water on the notion that the banking sector has become far more concentrated in recent years, pointing out that the dominance of the British banking sector by the so-called ‘big five’ (Santander, HSBC, Barclays, RBS/NatWest, and Lloyds/Halifax) had been in place since at least 1920. His talk then moved on to look at the impact that the deregulation of the financial sector in the 1980s — and the subsequent mergers that took place between banks and building societies — had upon the stability of the British financial sector. He also looked in some depth at the impact that the transferral of regulatory responsibility from the Bank of England to the FSA had on the sector. Lastly, he was also at pains to emphasise that bank failures have occurred many times before and will certainly occur again. As such, the goal for politicians and regulators should not be to prevent bank failures from ever occurring again, but, instead, to establish financial systems that will be able to weather such setbacks successfully.
Overall, this session confirmed that if we want to fully comprehend the events and factors leading up to the 2007-08 banking crisis then it is essential that we adopt a far more historically sensitive perspective — of the sort currently being undertaken by the WP2 section of the Tipping Points project — that takes into account the many changes that have taken place in the British financial sector over the past two centuries.
Further Reading (and listening)
Michie R. and Mollan S. 2011. British and American Banking in Historical Perspective: Beware of False Precedents.
History and Policy. http://www.historyandpolicy.org/papers/policy-paper-128.html (free online publication)
Michie R. and Mollan S. 2012. The City of London as an international commercial and financial centre in the Twentieth Century. Enterprise and Society (forthcoming volume 13 no.2 2012) Published online 27th January 2012. http://es.oxfordjournals.org/content/early/2012/01/27/es.khr072.extract
Podcasts (w/ financial legislation expert Dr Folarin Akinbami)