Ranald Michie is a talented and eclectic historian of global stock markets. His new title might suggest a textbook, but Repenser la Banque would have been preferred by cross-channel scholars less pragmatic and modest than Michie: he proposes some radical reassessments of what bankers did and did not do. Confessing to straying outside his comfort zone, he benefited from working with his Durham legal and social science colleagues on their Tipping Points project, provoking theoretical introspection on the highly polarized historical debates on bank performance. This project also generated new annual statistics on the numbers of banks in Britain from 1700 to today, which Michie presents alongside the (well-known) U.S. bank data.

The contrast is stark (pp. 271–88). From just one in 1782, the number of banks in the United States had soared past 1,000 by 1854 to peak at 30,456 in 1921, then declining to 5,876 in 2013. The number of British banks (abstracting from the later proliferation of quasi banks) rose from 49 in 1700 to an all-time peak of 1,124 in 1811 (more than a century before the much higher U.S. peak), falling steadily to 246 by 1921 and below 100 recently. The number of banks declined so early and so far in the United Kingdom despite both countries soon moving to what Douglass North and his associates called a more “open access” society, with general bank incorporation undermining any “crony” banks. Michie locates the cause in a long-run transformation of banks' balance sheets. After a great deal of trial and error driven by the need to generate returns, while minimizing the risks of their distinctive business of providing both payment services and maturity transformation, banks moved away from what was later called the Originate and Distribute model—then exemplified by the issue of private banknotes and bills of exchange traded in secondary markets by unit banks subject to periodic liquidity crises. The Bank of England increasingly monopolized banknote issue from 1844, and customer preferences for more flexible and sometimes longer-term loans and overdrafts drove domestic bills of exchange into terminal decline from 1873. Banks thus moved decisively to the more stable Lend and Hold model, deriving significant economies of scale and risk-sharing from the internalization of matching saving with borrowing (and of transaction processing) that had earlier been mediated by markets. This required the professionalization of local bank management through formal training and systematic sharing of organized knowledge based on depositors' and borrowers' accounts. The employees of the largest multibranch regional, national, and international banking corporations—many headquartered in London—were soon numbered in thousands, with meritocratic internal career hierarchies, supervised and monitored by head offices, which were, in turn, externally audited by professional accountants. Because core deposit-taking and lending remained essentially local, there was continuing (or even increased) branch competition in counties and towns, despite growing bank concentration nationally. This standard, corporate, one might (though Michie does not) even say Chandlerian model contrasted with the still crisis-prone American model of (mainly small and personally managed) unit banks, examined by state and federal functionaries, but eventually having to be saved by deposit insurance. Such U.S. socialistic tendencies applied to core capitalist institutions shocked conservative, laissez-faire British bankers (pp. 122–23).

Carefully analyzing national and international ramifications of the London money market before 1914, Michie also concludes that Bank of England policy was substantially driven by its own immediate business concerns in the declining discount market, where it remained a key operator (pp. 105–23). Barings was rescued in 1890 because of its systemic importance qua bill guarantor, not qua investment bank. Moreover, it was the new commercial banking model that provided stability to British banking, not primarily the Bank of England, which had progressively less knowledge or control of the rising joint-stock banking behemoths and did not act as a reliable Bagehot-inspired lender of last resort to joint-stock banks until the European crisis of 1914 (p. 123). Contrary to the usual claims, some banks were still allowed to fail (or were privately rescued) well into the twentieth century.

There is much more meat in the book. Michie is more positive than many about British banking performance between 1914 and 1945 and on more dimensions than the obvious one distinguishing Britain from nations where banks collapsed like flies. This distinctive resilience—despite Britain's exceptionally open economy being more exposed than others to the slump in international trade and investment—depended not primarily on the central bank or legislation (as U.S.-centric commentators too often suggest), but on “a small number of large banks with a diversified business model and strictly enforced code of banking behaviour” (p. 268). On the other hand, the dead hand of the state did assert itself from 1945 to 1970. This was a period of stagnation, as mainstream U.K. banks—under restrictive government policies enforced by the (from 1946 state-owned) Bank of England—marked time, while foreign rivals and British quasi banks prospered. Yet London bounced back to become a leading center of international finance, foreign exchange trading, and much else. Michie notes the recent revival of the Originate and Distribute model—this time in the guise of asset-backed securities, over-the-counter markets, and a global London interbank market over which the Bank of England had less control than the disappearing discount market—thus threatening stability. Yet the resilient British banking model survived relatively unscathed, for almost as long as its similar Canadian and Australian offshoots. He attributes blame for the less happy ten-year British descent into the 2007–2008 financial crisis to domestic as well as U.S. failings—he thinks the 2007 Northern Rock crisis is too often ignored. However, as the leading center of international dollar lending, London was particularly exposed to the U.S. 2008 crisis, without its central bank having the power to print dollars to counteract chronic illiquidity. Michie is particularly harsh on economists employed on banks' risk-modeling (purporting to eliminate risk while actually exacerbating it), as well as the economists newly in charge at the Bank of England (transforming it into a monetary policy committee while sidelining financial stability expertise). There—and in the most aggressively expanding commercial banks (where accountants and retailers displaced experienced bankers in leadership positions)—cultural knowledge had been lost. It had to be quickly and painfully relearned.

One might quibble about some reinterpretations, but finance gurus who think they know their field—as well as business historians generally—will benefit from confronting Michie's insightful perspectives, which are refreshingly historically driven and firmly resistant to Whig hindsight.