8 - Shaved Eyebrows

Summary

The concept of an overall regulatory approach to financial stability only emerged in the 1980s, when the word macro-prudential appears for the first time. The Bank’s attention was largely focused at this time on the problems of particular institutions: the exposure of large UK banks to Latin American debt in the run-up to the 1982 debt crisis; and then the collapse of Johnson Matthey Bankers in 1984. The Bank bought JMB for £1, and then injected £100 m into JMB. The manner of the rescue, and its justification as needed to save the credibility of the London bullion market, looked very much like the old-style City at work. It brought a great deal of political and media criticism of the Bank, and set the stage for new banking legislation in 1987. Financial supervision was trapped on the one hand between obsession with scandal and inability to confront systemic issues, and on the other between a need for international coordination and its practical and political impossibility. The Bank began to believe that it needed to give up on its old self-perception that it was a part of a City protective network.