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- Title
The banking crisis of 1878: some remarks.
- Authors
Ziegler, Dieter
- Abstract
The article offers a highly interesting hypothesis about the immediate reason for the relatively weak connection between English banks and domestic industry in late Victorian and Edwardian Britain. The reason for the relatively few bank failures during the crisis, which, together with the relatively moderate interest rate increases, is held responsible for the general tendency to underrate its seriousness in England, was the Bank of England acting as domestic lender of last resort. Stock prices were depressed and the Bank did not normally sell stocks under such circumstances, and for its notorious borrowing on stock the Bank only utilized government stock by the late 1870s. There can be no doubt that, with very few exceptions, provincial banks did not rediscount at the Bank but turned to the London money market which in turn could also only partly rely on the Bank as lender of last resort. It may have been this combination of not having a reliable lender of last resort and the recognition that the growing fixed capital investment needs of certain branches of industry at times rendered a dangerously large part of assets unavailable, that induced provincial banks to reduce advances on 'industrials' and overdraft facilities to industrial customers, while simultaneously investing in marketable London securities.
- Subjects
ENGLAND; BANKING industry; BANK failures; LOANS; BANK investments; STOCK prices; MONEY market
- Publication
Economic History Review, 1992, Vol 45, Issue 1, p137
- ISSN
0013-0117
- Publication type
Article
- DOI
10.2307/2598332