More detailed statutory banking regulation could reduce the Bank of England's room to discipline institutions informally. Before every power was written down, the Bank could warn an institution to stop an objectionable practice or face government regulation. That threat did not replace formal regulators when serious intervention was required, but it could still exert considerable influence. A partial parallel appears in modern British railways, where operators have formal rules yet also know that Network Rail or government can make continued noncompliance costly.
Notable Point · 2:35:57-2:39:45
Informal authority can regulate institutions
The Bank of England's former soft-power discipline is compared with the informal leverage that still shapes British railway operators.