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PKSG Working Paper Series

Working Paper PKWP1201

Financial institutions and the state: a re-examination

January 2012

Victoria Chick, Sheila C. Dow

The purpose of the paper is to revisit the relationship between the British State and the banks in the light of the crisis. This requires a historical treatment of the evolving relationship between these parties in providing society’s money and facilitating credit creation. We then focus on how the previously supportive relationship was changed decisively in 1971 and consider implications for the future. Rather than making banks increasingly like non-bank financial intermediaries, we argue for a renewed relationship of mutual trust and obligation between the banks and the state as a means of reducing the future incidence of crises.

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