The Global Financial Crisis made its first appearance in Britain towards the end of 2007 with the failure of the Northern Rock Bank. It then reached an unparalleled intensity a year later when
the government was forced to intervene to prevent the collapse of Lloyds/HBOS and RBS/Natwest. Before these events the British banking system possessed a long established reputation for
resilience and competence that made it one of the most admired and trusted in the world. The financial crisis of 2007/8, and the subsequent revelations about the behaviour of bankers, destroyed
that reputation and drove a desire for a complete reform of the British banking system. Forgotten in this headlong rush towards radical restructuring were the reasons why the British banking
system had become so admired and trusted. The aim of this book is to explain why the British banking system gained its reputation for resilience and competence, maintained it for over 100
years, and then lost it in such a rapid and spectacular fashion.
To achieve that aim requires a study of the entire banking system. Banks are key components of a complex financial system continually interacting with each other, and constantly changing over
time, This makes the conventional distinctions drawn between different types of banks, including those specialising in international finance, savings and loans, corporate lending, and retail
deposits and borrowing, inappropriate for any long-term analysis. The distinctions between different types of banks were neither absolute nor permanent but relative and temporary. Banks were
also central to both the payments system and the money market without which no modern economy could function. What this book is about is the development of the British banking system as a whole
over more than three centuries. Only with such an understanding is it possible to appreciate what the British banking system achieved and then maintained from the middle of the 19th century
onwards, why it was lost in such a short space of time, and what needs to be done to return it to the position it once occupied. Without such an understanding the mistakes of the recent past
are destined to be repeated time and gain.
