ABSTRACT
For almost the entire post-war period commercial bank advances have been subject to varying degrees of official guidance. It has generally taken the form of requests, delivered on behalf of the Treasury by the governor of the Bank of England, but in the background there is the knowledge that statutory powers of direction could be invoked. For the most part such requests have been qualitative, with an occasional stiffening of quantitative controls. The looseness which characterized the qualitative guidance given arose from the wartime origins of the control. On the outbreak of war the banks were requested, in the interests of conserving real resources, to restrict advances 'to purposes which would assist the war effort or which were otherwise designed to meet national needs', that is, the 'needs of defence production, the export trade, coal mining and agriculture'. The banks thus had freedom of action with regard to the control of 'advances made in the normal course of banking business', and this exemption was continued after 1946 in the Borrowing (Control and Guarantees) Act. Such an informal method had its critics, but the prevailing physical controls made the strict working of financial ones less pressing. The banks themselves were at no loss to cut out extreme cases, and an official historian of the period observed that the 'easy and shadowy rein on which it was run was as good as the occasion demanded'.1
