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Complexity and Crisis in the Financial System

Complexity and Crisis in the Financial System

Critical Perspectives on the Evolution of American and British Banking

Edited by Matthew Hollow, Folarin Akinbami and Ranald Michie

With contributions from across the disciplines of law, history, finance, and economics, Complexity and Crisis in the Financial System offers a truly interdisciplinary study of the relationship(s) between crises and complexity in the US and UK financial markets. Taken together, the contributions in this volume not only challenge many often taken-for-granted ideas about the nature of financial crises, but also broaden our understanding of the long-term causes (and consequences) of the global financial crisis of 2007–2008.

Chapter 7: Directors in the dock: joint-stock banks and the criminal law in nineteenth-century Britain

James Taylor

Subjects: business and management, critical management studies, strategic management, economics and finance, economic psychology, financial economics and regulation


This chapter explores the regulation of banks in nineteenth-century Britain. But rather than focusing on the familiar chain of legislation from the 1826 statute permitting joint-stock banking outside London to the act of 1879 which encouraged these banks to restrict their liability, the chapter looks instead at the criminal law. While the criminal law played little part in regulating banking in the years immediately following the legalization of joint-stock banks, high-profile failures and frauds encouraged lawyers and legislators to see a role for criminal sanctions from mid century. This chapter explores the gradual process of criminalization, showing that while London scandals were important, cases from across the UK, including Scotland and Jersey, influenced the direction of the law. And though judges did not interpret the law consistently, the trend was towards a more rigorous application of the criminal law both to bankers and company managements more generally. The result was that by the end of the century, the criminal law had become an important element in the regulatory mix, helping to stabilize the economy in times of crisis and defining the limits of acceptable practice. The chapter concludes by placing this history in the context of the financial crisis of 2007–08. It argues that recent efforts to criminalize ‘reckless’ banking notwithstanding, what has been lacking in the aftermath of the crisis is not suitable legislation to punish wrongdoers, but the political will to enforce existing laws.

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