ABSTRACT
From 1971, a new system - Competition and Credit Control - was introduced; although special deposits remained in force, they did not form part of the reserve assets of the new system. Reserve requirements before 1971 applied only to the clearing banks. The system of Competition and Credit Control applied to all banks, and required them to keep a minimum of 12.5 per cent of 'eligible liabilities' (broadly equivalent to sterling deposits) in reserve assets of balances with the Bank ofEngland, money at call, UK Treasury bills, other bills eligible for discount at the Bank of England, and British Government Stocks with one year or less to run to maturity. The clearing banks were required to keep 1.5 per cent of eligible liabilities in balances with the Bank ofEngland, and bills other than Treasury bills counted as reserve assets for only up to 2 per cent of eligible liabilities. With these exceptions, the banks were free to choose between different categories of reserve assets. This new system also provided reserve requirements for discount houses and finance houses. From September 1975, calls for special deposits were extended to include the whole banking system and certain finance houses.
