Complexity and Crisis in the Financial System: Critical Perspectives on the Evolution of American and British Banking PDF
Preview Complexity and Crisis in the Financial System: Critical Perspectives on the Evolution of American and British Banking
Complexity and Crisis in the Financial System . Complexity and Crisis in the Financial System Critical Perspectives on the Evolution of American and British Banking Edited by Matthew Hollow University of York, UK Folarin Akinbami Durham University, UK Ranald Michie Durham University, UK Cheltenham, UK • Northampton, MA, USA © Matthew Hollow, Folarin Akinbami and Ranald Michie 2016 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA A catalogue record for this book is available from the British Library Library of Congress Control Number: 2015945475 This book is available electronically in Business subject collection DOI 10.4337/9781783471331 ISBN 978 1 78347 132 4 (cased) ISBN 978 1 78347 133 1 (eBook) Typeset by Servis Filmsetting Ltd, Stockport, Cheshire 6 0 Contents List of figures vii List of tables viii List of contributors ix Acknowledgements xv Introduction: rethinking the crises–complexity nexus 1 Matthew Hollow PART I COMPLEXITY AND CRISES IN FINANCIAL SYSTEMS 1. Financial innovation and the consequences of complexity: insights from major US banking crises 13 Robert F. Bruner, Sean D. Carr and Asif Mehedi 2. Entrepreneurial failure and economic crisis: a historical perspective 36 Mark Casson 3. Nature or nurture: the British financial system since 1688 60 Ranald Michie 4. The British banking population: 1790–1982 85 Ian Bond PART II LEGISLATIVE AND STRUCTURAL CHANGES IN THE FINANCIAL SECTOR 5. From tort to finance: Delaware’s sedative duty to monitor 121 Dalia Tsuk Mitchell 6. Demutualization and risk: the rise and fall of the British building society 149 Andrew Campbell and Judith M. Dahlgreen 7. Directors in the dock: joint- stock banks and the criminal law in nineteenth- century Britain 164 James Taylor v vi Complexity and crisis in the financial system 8. UK corporate law and corporate governance before 1914: a re- interpretation 183 James Foreman- Peck and Leslie Hannah 9. Effective risk management and improved corporate governance 214 Roman Tomasic and Folarin Akinbami PART III MANAGING AND REGULATING COMPLEX FINANCIAL SYSTEMS 10. The historical development of the US government’s responses to economic and financial crises 243 Peter H. Bent 11. From the mid n ineteenth-c entury bank failures in the UK to the twenty- first- century Financial Policy Committee: changing views of responsibility for systemic stability 261 T.T. Arvind, Joanna Gray and Sarah Wilson 12. Financial reporting, banking and financial crisis: past, present and future 287 Mark Billings 13. Financial crises and disaster management 306 John Singleton Index 329 Figures 1.1 US banking crises, bank assets and GDP growth, 1834–2013 16 3.1 The number of UK banks, 1559–2008 63 3.2 The number of UK banks/nominal value of UK national debt, 1750–1850 65 3.3 The number of US banks, 1782–2013 75 4.1 British banking population: active firms, 1790–1982 99 4.2 British banking population: new firms, 1790–1982 99 4.3 British banking population: exits by merger, 1790–1982 100 4.4 British banking population: exits by failure and closure, 1790–1982 100 4.5 Country banks, 1800–1842 104 13.1 Revised Disaster Management Cycle 310 vii Tables 1.1 Case studies – innovations in financial instruments, institutions and markets 32 2.1 Crises originating in or impacting upon the UK, 1600–2007 41 2.2 Simple typology of the normal state of the economy and a crisis- prone state 53 4.1 Other banking population estimates, 1844–1884 (England and Wales only) 105 4.2 Other banking population estimates, 1884–1924 (England and Wales only) 106 viii Contributors Folarin Akinbami joined J.P. Morgan as an Associate in February 2015. Prior to this, he was Lecturer in Commercial Law at Durham University, where he taught and researched Financial Regulation and Corporate Governance. He was seconded to the Law Commission of England and Wales, as Team Lawyer, between October 2013 and June 2014, where he worked on the Fiduciary Duties of Investment Intermediaries project. Prior to his appointment as a lecturer, he was a Post-D octoral Research Associate in Durham Law School and the Institute of Hazard, Risk and Resilience (IHRR) at Durham University. The research in this book was carried out while he was at Durham University and he is pleased to have worked on the Leverhulme Trust-f unded ‘Tipping Points’ project at Durham. He is also pleased to have co-a uthored a number of articles and chapters with Professor Roman Tomasic. T.T. Arvind is Professor of Law at Newcastle Law School, having entered academia after several years as a commercial practitioner. He has pub- lished extensively in the areas of legal history and private law. His recent work has explored the connections and boundaries between the worlds of common law and regulatory action. He is the author of The Law of Obligations: A New Realist Approach (in press), and the joint- editor, with Jenny Steele, of Tort Law and the Legislature: Common Law, Statute and the Dynamics of Legal Change (Hart, 2013). He was awarded the ICLQ Young Scholar Prize in 2010 and the Society of Legal Scholars Best Paper Prize in 2009. Peter H. Bent is a Marie Curie Early Stage Research Fellow in the Department of Economics at the University of Oxford and a PhD student in economics at the University of Massachusetts, Amherst. Before beginning his doctoral studies, he earned an MSc in Economic History (Research) at the London School of Economics and an MA in Economics at the University of New Hampshire. His current research focuses on the role that international capital flows played in financial crises during the classical gold standard era. Mark Billings is Senior Lecturer in Accounting and Business History at the University of Exeter Business School. He has previously held various ix x Complexity and crisis in the financial system administrative and financial management positions in investment banking and business, and academic posts at the City University Business School, London, Sheffield Hallam University and Nottingham University Business School. He is a graduate in economics and holder of an MSc in Financial Management from the Universities of Sheffield and London, respectively, and has been a member of the Institute of Chartered Accountants in England and Wales since 1985. His research interests are in banking, financial and accounting history and financial reporting, and he currently teaches undergraduate courses on corporate governance and auditing. Ian Bond worked as an economist at the Bank of England for over 30 years. His career included work on monetary policy (in particular as Head of the Structural Economic Analysis Division and as a member of the Monetary Policy Committee secretariat), but was mainly devoted to finan- cial stability and prudential policy issues – latterly as Head of the Financial Resilience Division, a role which included responsibility for the Bank’s payment systems oversight function and for the development of the Bank’s approach to the management of financial crises. Since his retirement from the Bank, he has been undertaking research on the patterns of bank failure in the UK since the end of the eighteenth century and on the structural and legislative changes associated with that experience. He was a member of the Advisory Council for the ‘Tipping Points’ project at the IHHR in Durham. Robert F. Bruner is University Professor, Distinguished Professor of Business Administration, and Dean Emeritus of the University of Virginia’s Darden School of Business. A faculty member since 1982 and winner of leading teaching awards at the University of Virginia and within the Commonwealth of Virginia, he teaches and conducts research in finance and management. As a financial economist, Bruner is best known for his research on mergers and acquisitions, corporate finance and financial panics. His books, Deals from Hell and Applied Mergers and Acquisitions, have helped numerous practitioners and students toward suc- cessful transactions. The Panic of 1907: Lessons Learned from the Market’s Perfect Storm, his book with Sean D. Carr, attracted wide attention for its discussion of the underpinnings of financial crises. Bruner received a BA from Yale University and his MBA and DBA degrees from Harvard University. Andrew Campbell is the holder of the Chair of International Banking and Finance Law at the University of Leeds, UK. He is a Solicitor of the Supreme Court of England and Wales and a Chartered Banker. He has written extensively on international banking law and regulatory issues
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