Blinking in the face of trouble

Alistair Darling’s guarantee for deposits at Northern Rock has stopped a bank run in Britain—but creates another risk

Reuters/AFP

BRITAIN has not experienced a serious bank run since the 19th century. After the collapse of Overend Gurney in 1866, the Bank of England recognised that an essential function of a central bank was to act as a lender of last resort to a solvent bank that was short of ready cash to repay depositors. The bank runs that blighted the German and American economies in the early 1930s passed Britain by. A serious banking crisis in the 1970s was sorted out behind the scenes.

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