Loughborough University
Browse
SPCCreditCrunchfp.pdf (313.21 kB)

The sub-prime crisis, the credit crunch and bank "failure": an assessment of the UK authorities' response

Download (313.21 kB)
preprint
posted on 2009-02-10, 14:35 authored by Maximilian Hall
On 8 October 2008 the UK Government announced a far-reaching plan to restore financial stability, protect depositors and re-invigorate the flow of credit to businesses and individuals in the UK. The £400 billion bailout plan embraced three elements: a massive expansion in emergency liquidity support from the Bank of England; recapitalisation of UK banks and building societies using taxpayers' money; and the provision of a Government guarantee of new short- and medium-term debt issuance made by UK-incorporated banks and building societies. This action proved necessary in the wake of continuing and substantial weaknesses in many banks' share prices despite the temporary ban on short-selling imposed by the Financial Services Authority. It followed two revisions to domestic deposit protection arrangements, and the adoption of a piecemeal approach to failure resolution which saw the eventual nationalisation of Northern Rock in February 2008, the nationalisation of Bradford and Bingley in September 2008 and the brokering of takeover rescues of Alliance and Leicester and HBOS by Banco Santander and Lloyds TSB respectively in July and September 2008, and of the Cheshire and Derbyshire Building Societies by the Nationwide Building Society in September 2008. This metamorphosis in approach to failure resolution by the UK authorities in response to the sub-prime crisis and the credit crunch – nationalisation by default to (part) nationalisation as the preferred course of action - is duly analysed in this article, as well as their proposals for banking reforms which still have to be agreed by Parliament.

History

School

  • Business and Economics

Department

  • Economics

Publisher

© Loughborough University

Version

  • VoR (Version of Record)

Publication date

2008

Notes

This is a working paper. It is also available at: http://ideas.repec.org/p/lbo/lbowps/2008_14.html

ISSN

1750-4171

Language

  • en

Usage metrics

    Loughborough Publications

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC