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SUMMARY:Mortgages\, maturity mismatching and the transformation of British
  banking: 1971-92 - Dr William Turkington (HM Treasury)
DTSTART:20260316T170000Z
DTEND:20260316T183000Z
UID:TALK242668@talks.cam.ac.uk
CONTACT:Dr Duncan Needham
DESCRIPTION:This talk traces the growth of UK clearing bank mortgage lendi
 ng since the 1970s. To offer mortgages\, the clearing banks had first to f
 orget the cardinal rule of banking and abandon their long-held aversion to
  maturity mismatching (borrowing short to lend long). \nDuring the 1960s t
 he clearing banks were suffering under intense\, restrictive monetary poli
 cy and losing market share to the finance houses and foreign banks.  The H
 eath Government introduced Competition and Credit Control in 1971 partly t
 o right those wrongs.  It ended up unleashing an incredible growth in cred
 it.  The policy was abandoned after two years but not before it had fundam
 entally changed British banking – the clearing banks had shifted from as
 set management to liability management by bidding for wholesale funds on t
 he money markets.\nStill hesitant to maturity mismatch domestically\, in t
 he 1970s the banks gained some familiarity with mismatching (‘maturity t
 ransformation’) in their international business.  Stagnant growth\, pers
 istent inflation\, and monetary control at home prevented them from expand
 ing their domestic business\, even as they were losing deposit market shar
 e.  So when international business soured during the 1980s the clearing ba
 nks extended their mortgage lending in order to recapture retail deposits.
  \nThis business proved popular and the clearing banks’ mortgage lending
  grew substantially during the 1980s.  The demarcations between financial 
 institutions continued to blur and\, in time\, clearing banks’ longstand
 ing aversion to maturity mismatching faded into history.\n
LOCATION:John Bradfield Room\, Darwin College and Zoom
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