The English law set a maximum interest rate on loans. To trace the regulation's effect, this chapter examines the tightening of the usury laws in 1714, when the maximum permissible rate was reduced from 6 to 5 percent. The micro data, derived from the bank archives of several goldsmith banks, suggest that only the most well-connected and rich clients retained access to borrowing; the importance of collateral increased. As a result, the efficiency of the English financial system declined. At the same time, the government had an unfair advantage in competing for savings, as reflected in low borrowing rates.
Keywords: usury laws; loan pricing; collateral; borrowing; lending; risk; social structure; re-feudalization of lending
Chapter. 8577 words. Illustrated.
Subjects: Economic History
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