The period since 1960 has witnessed major changes in the structure and functioning of the United Kingdom banking sector which have created entirely new problems for the authorities in their attempts to control and supervise financial institutions. The reasonably stable banking system of the 1950s was transformed into an unstable system by the early 1970s leading to a crisis of confidence in the British banking sector. Only prompt action by the Bank of England and the clearing banks prevented the crisis from gravely damaging the functioning of the financial system. The repercussions of the crisis are still visible today as the Bank of England continues to grapple with the problems of the prudential supervision of financial institutions which it is prepared to recognise, or license, as bona fide banks under the Banking Act, 1979.
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