The Governor was alerted given the “almost unthinkable consequences should Barings go down: not only would the failure of the City’s leading accepting house inevitably bring down a host of other firms… but the very status of London would be threatened and thus the pre-eminence of the City as an international financial 4  centre” . Amidst much to-ing and fro-ing between the Bank of England (hereafter “the Bank”), the Treasury and Downing Street, it was becoming apparent that the crisis at Barings was one not only of liquidity but also of solvency, and that there was now a palpable loss of confidence in the institution throughout the City. The Bank alone could not afford to act as lender of last resort so eventually the Governor of the day – Lidderdale – announced the establishment of a guarantee fund for Barings; within half an hour, the City’s top institutions rushed to contribute – the likes of Raphaels £ Antony Gibbs and Brown Shipley £ apiece) and Smith Payne & Smiths, Barclays, Morgan and Hambros (each contributed £ Indeed, the  2 3 4  Kynaston, David. City of London: the history, London, Vintage Books, 2012, pp130-131 Ibid, p.131 Ibid, pp.133-134 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  leading joint-stock banks had put themselves down for £ and by mid-afternoon the fund was up to 5  £ and climbed further to £ by the following week . Barings was saved.
It also made for a lucrative line for insurers, not least as motor cover was compulsory, though the period was also marked by a good number of insurers that failed. In response to this, the Cassell Committee on Compulsory Insurance was established in 1937. With its recommendations temporarily stalled by the onset of the Second World War, which understandably diverted Parliament briefly from the noble topic of insurance supervision, they were implemented somewhat belatedly in the form of the Insurance Companies Act 1946. Crucially, the Act strengthened the powers of the Board of Trade (later the Department of Trade and Industry, or DTI) and introduced solvency margins, with the amount being set as the greater of £ or a 34  tenth of premiums . In addition, insurers had to have at least £ in paid up share capital and the Motor Insurers’ Bureau was established to fulfil claims for victims of uninsured drivers, funded by a levy on the motor insurance industry. Despite these reforms, nine motor insurance companies failed in the period 1966-67. In typical fashion, a new piece of legislation was enacted in response. The Companies Act 1967 further strengthened the hand of the DTI, which was now empowered to refuse authorisation, impose conditions on a firm’s operation and 35  prevent control of the company from those individuals not deemed fit and proper . Thus, we see elements of a supervision regime begin to emerge which persist in the PRA to this day.