Selective award of a public privilege: an analytical evaluation of a potential obstacle to the growth of not-for-profit financial institutions in the UK

Werner, R.A. (2009) Selective award of a public privilege: an analytical evaluation of a potential obstacle to the growth of not-for-profit financial institutions in the UK (Discussion Papers in Centre for Banking, Finance and Sustainable Development) Southampton, UK. University of Southampton

Record type: Monograph (Discussion Paper)

Abstract

The financial crisis has raised questions about the role of banks in the economy and society. Credit unions are not-for-profit financial institutions that do not pay substantial bonuses, do not engage in speculative investments, but focus on local, smaller-scale lending and redistribute their proceeds to their members. They are important in most major economies, but not in the UK. In this analytical paper a new hypothesis concerning their lack of expansion in Britain is considered by asking the question whether they have been awarded the same public privilege as banks, namely to create credit. There is no prior literature on this issue. An analysis of the regulatory environment yields that, unlike in other countries, they have had no material credit creation powers until 2002. Since then their capacity to create credit has remained severely restricted.

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