Prior to this Act there was no specific banking law in the UK. Prompted by the secondary banking crisis in 1972, the Bank of England, for the first time in its history, was assigned formal responsibility for the prudential regulation of UK banks. The Bank of England was nationalized in 1946, and had been responsible for price and general financial stability, answering to Her Majesty’s (HM) Treasury.
The 1979 Act covered clearing and merchant banks, finance and discount houses, and foreign banks. The Bank of England decided on whether a firm was given bank status.11 To qualify for bank status, the firm had to offer facilities for current and deposit accounts, overdraft and loan facilities to corporate/retail customers, and at least one of: foreign exchange facilities, foreign trade documentation and finance (through the issue of bills of exchange and promissory notes), investment management services, or a specialized banking product.
Also, the Bank of England had to be satisfied that the ‘‘bank’’ had an excellent reputation in the financial community, the affairs of the bank were conducted with integrity and prudence, the bank could manage its financial affairs, and ‘‘fit and proper’’ criteria were applied to all directors/controllers/managers. These conditions ensured an ongoing supervisory function for the Bank, because it could revoke bank status at any time.