U.K. Approach to Financial Crisis Management

Abstract:     
National governments have been forced to use an extraordinary amount of public resources and techniques to contain the global financial crisis (“the crisis”). This Article analyzes the role of the U.K. Tripartite Authorities in dealing with the crisis - both the “ordinary” measures, such as the Bank of England’s role as Lender of Last Resort, and the “extraordinary” measures it used, such as blanket guarantees, recapitalization, and asset purchase schemes. It evaluates the U.K. response and the challenges of this period of containment by comparing issues that arose from past financial crises. The Article concludes that the containment of a financial crisis of systemic proportions requires both an overarching and a case-by-case approach to deal with banks experiencing insolvency rather than liquidity problems.

Number of Pages in PDF File: 55

Keywords: Lender of Last Resort, Financial Crises, Causes of the financial crisis, Responses to the financial crisis, Systemic Risk, Macro-micro prudential supervision, Subprime financial crisis, Crisis Containment, Bank Bailout, Bank Insolvency and Liquidity.

JEL Classification: K22, K19, K24

working papers series