James T. Baines and C. Nicholas Taylor
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.