These two books look at the same subject, the supervison of banking in the United Kingdom, but from such different points of view that they barely intersect. The main concern of Professor Llewellyn is to consider the form and efficiency of financial regulation in the United Kingdom compared with other mechanisms, primarily those of the free market. In stark contrast, Graham Penn accepts the presence of regulation (a lawyer’s stock in trade) and reflects almost exclusively on the content of the Banking Act 1987 with passing reference to its effectiveness. Despite the more general title, Llewellyn concentrates on the regulation of banks and building societies, with a salutary return to the fundamental concepts of regulation such as the purpose, form and efficiency of regulation. He considers regulatory cost and the balance to be struck between the benefits of regulation and its potential to impair innovation and competition. Penn almost entirely eschews the consideration of the legislation in action and policy issues, in favour of a clear and readable traditional legal analysis of the Banking Act 1987 with particular attention to the changes to the current legislation in comparison with its predecessor of 1979.

It is possible, however, when reading these two works together, to draw their threads into one pattern. It is characteristic of the infancy of legal scholarship in the regulation of financial institutions in the United Kingdom (in fact, probably anywhere other than the United States) that this task is left to the reader rather than being attempted by the author. It also speaks volumes about the capacity of lawyers to see their area of interest in isolation from all others. There are plenty of precedents for this task of weaving together traditional legal analysis with consideration of policy matters in criminal law, consumer law and administrative law, to name just a few, and much could be gained in the area of financial regulation from doing the same. Although the two books reflect the different approaches of the lawyer and the economist, on the topics of flexibility of regulation and deposit insurance schemes, they interconnect. Llewellyn discusses the benefits of deregulation in contributing to a decrease in regulatory cost and an increase in flexibility and innovation. Penn then sets out the legal framework in which the Bank of England operates its scheme of discretion mixed with policy. He complements this with some insights into the day-to-day dealings between the Bank and those it supervises, the two books providing a full picture of the theory and legal structure and an actual example of a well developed flexible regime in practice. The United Kingdom banking deposit insurance scheme is treated mutatis mutandis as between the two books.

Llewellyn concentrates on banks and building societies, though his work has clear implications for securities and other financial markets. His thesis is that there is a residual case for regulation and that, when techniques of risk management are improved, the need for legal regulation, with its distorting effects will diminish. In relation to preservation of bank deposits, he argues that ideally all that is required is a deposit insurance scheme, an appropriate level of information available to the depositor and lender of last resort facilities from the central bank. A minimal level of regulation is required because the imperfections of the real world make it necessary to counter moral hazard problems and the like. Another illustration of the central thesis is Llewellyn’s argument that the improvement of portfolio theory and greater diversification of bank assets results in lower levels of risk and has hence contributed to the deregulation of banking.