University of Cambridge > Talks.cam > Economic and Social History Seminars > Summer in the City: banking failures of 1974 and the development of international banking supervision

Summer in the City: banking failures of 1974 and the development of international banking supervision

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This paper examines how the ‘near miss’ global banking crisis in the summer of 1974 affected longer-term trends in international banking supervision, with a particular emphasis on the impact on trust within banking systems and between supervisors and the market. Three episodes of bank fraud in 1974 were crucial in prompting the launch of the Basel Committee for International Banking Regulation. The effects that each of these episodes had on national and international policy are explored, using new archival evidence. This evidence shows how the events of 1974 prompted the individual and collective reassessment of regulation systems that had been developed in the more stable environment of capital controls and pegged exchange rates of the first three decades after the end of the Second World War. But the challenges of how to replace trust with formalised structures proved intractable. Despite clear evidence of widespread fraud, supervisors generally persisted with the notion of self-regulation, although they took steps toward formalising their assumptions through the Basel Accord, increased monitoring and letters to formalise hitherto implicit commitments to good practice. After more than 30 years of grappling with these issues, the 2007 global financial crisis revealed that the problems of transparency and effective supervision are persistent challenges for the global banking system.

This talk is part of the Economic and Social History Seminars series.

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