Capital in British banking, 1920–1970 |
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Abstract: | British banks have long attached great importance to capital. Currently they are subject to greater scrutiny and regulation on this issue than ever before. However, it was not until the disclosure of ‘hidden reserves’ in 1970 that a true picture of British banks' capital emerged. This article uses archival evidence to reveal the capital ratios of several major banks for much of the twentieth century, and demonstrates how these ratios were influenced by official restrictions. Overall the banks maintained much higher levels of capital than implied by their published accounts, although the impact of official restrictions was to force them to operate with lower capital ratios than they desired. But it is argued that capital ratios were neither achieved nor maintained at the expense of reduced or less risky lending. |
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Keywords: | Banks Banking History Capital Capital Adequacy Hidden Reserves |
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