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Policy debate: understanding the credit crisis: why banks collapsed - and with them the mainstream paradigm in economics and finance

Policy debate: understanding the credit crisis: why banks collapsed - and with them the mainstream paradigm in economics and finance
Policy debate: understanding the credit crisis: why banks collapsed - and with them the mainstream paradigm in economics and finance
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.
bank credit, credit creation, credit unions, UK financial services
University of Southampton
Werner, R.A.
dc217378-eb19-4592-9be4-ab5f847b74a1
Werner, R.A.
dc217378-eb19-4592-9be4-ab5f847b74a1

Werner, R.A. (2009) Policy debate: understanding the credit crisis: why banks collapsed - and with them the mainstream paradigm in economics and finance (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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More information

Published date: September 2009
Keywords: bank credit, credit creation, credit unions, UK financial services

Identifiers

Local EPrints ID: 79277
URI: http://eprints.soton.ac.uk/id/eprint/79277
PURE UUID: 5f81bd24-f001-4e8c-be6b-849ef170a5d1

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Date deposited: 11 Mar 2010
Last modified: 10 Dec 2021 17:33

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Contributors

Author: R.A. Werner

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