The development of the role of the Bank of England as a Lender of Last Resort, 1870-1914
type: CreativeWork
description: This thesis studies the role of the Bank of England as a lender of last resort (LLR) in the 1870-1914 period. It also considers how the Bank reacted to the failure, or the possibility of failure, of financial institutions. This concern with crises arises out of fractional reserve banking: banks keep only a small proportion of their deposit liabilities in the form of cash, and thus are not able to supply all depositors with cash at any one time. If a sudden demand for cash arises, institutions with no solvency problems can fail due to a lack of liquidity in the financial markets, and widespread problems of this sort may lead to a collapse in the money stock. The role of the LLR is to provide sufficient liquidity to enable institutions to overcome their liquidity problems. The importance of the LLR in the late nineeenth century is that it was only in this period that the Bank of England started to take on the characteristics of a last resort lender. In the last thirty years of the nineteenth century there was an absence of financial crises as compared to the previous two centuries, and it is therefore possible that the Bank of England had by this time altered its behaviour so as to remove the possibility of widespread crisis occurring. It is this question which this thesis examines. A primary objective of the analysis in this study was to identify moments of crisis or potential crisis in the London financial markets between 1870 and 1914, with a view to assessing how the Bank of England dealt with them: did it satisfy our idea of an efficient LLR? We therefore collected data from the Bank's archives which showed the exact pattern of the Bank's discount and advance activities on a daily basis. These data were subjected to a rigorous statistical examination to enable identification of moments of financial tension. The Bank's behaviour was then analysed with respect to the theoretical framework. The results reinforce the conclusions of earlier studies, in that although t…
abstract: This thesis studies the role of the Bank of England as a lender of last resort (LLR) in the 1870-1914 period. It also considers how the Bank reacted to the failure, or the possibility of failure, of financial institutions. This concern with crises arises out of fractional reserve banking: banks keep only a small proportion of their deposit liabilities in the form of cash, and thus are not able to supply all depositors with cash at any one time. If a sudden demand for cash arises, institutions with no solvency problems can fail due to a lack of liquidity in the financial markets, and widespread problems of this sort may lead to a collapse in the money stock. The role of the LLR is to provide sufficient liquidity to enable institutions to overcome their liquidity problems. The importance of the LLR in the late nineeenth century is that it was only in this period that the Bank of England started to take on the characteristics of a last resort lender. In the last thirty years of the nineteenth century there was an absence of financial crises as compared to the previous two centuries, and it is therefore possible that the Bank of England had by this time altered its behaviour so as to remove the possibility of widespread crisis occurring. It is this question which this thesis examines. A primary objective of the analysis in this study was to identify moments of crisis or potential crisis in the London financial markets between 1870 and 1914, with a view to assessing how the Bank of England dealt with them: did it satisfy our idea of an efficient LLR? We therefore collected data from the Bank's archives which showed the exact pattern of the Bank's discount and advance activities on a daily basis. These data were subjected to a rigorous statistical examination to enable identification of moments of financial tension. The Bank's behaviour was then analysed with respect to the theoretical framework. The results reinforce the conclusions of earlier studies, in that although t…
author: Ogden, E.M.
keywords: HG Finance
date published: 1988-09
date modified: 2026-07-24T01:39:11Z
provider: City University of London
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: City University London