The narrative so far has shown how regulation in the UK has been changed for political reasons and has had (negative) market impacts. The regulatory changes, be it C&CC or the Banking Act, have come about for numerous causes, as we have seen, and to an extent followed on from each other: the 1979 Banking Act happened because of the secondary banking crisis which happened because of the failures of C&CC (which is not to say there were not other factors involved, as we have seen).

In the introductory chapters we looked at the political definition of banks. We argued that the institutional form of a “bank” (what an entity can do in a market) represents the political compromise of a given time and place, and one that can therefore change frequently. It is not stable and only indirectly reflects developments in the market. A “bank” derives from permissions granted by the state, for its own reasons. But they operate in markets, according to market principles, to maximize profits. This misalignment causes financial instability through the disembedding of financial markets from wider society (following Polanyi; see Figures 1.1 and 1.2).

Banking does not exist apart from the regulation that defines it. Banks are defined by their permissions, and their activities are conditioned upon what they are authorized to do, or forbidden from doing. The search for profits encourages the growth of activities outside of the regulated sector which, because of the inherent instability of finance as shown by Minsky, tend toward financial crises. Following the crisis there is a mop-up operation to recover the financial sector (and often the wider economy as well) which has the practical effect of, at least minimally, re-embedding finance to some extent: at the very least by reimposing additional conditionality and constraints on the financial firms that require support and the wider banking system (such as through the forced purchase of the firm, such as with JMB, or the lifeboat operation).

The first cause of this overall narrative was the introduction of the policy of competition and credit control (C&CC) by the Bank of England in 1971.