saying that the very existence of the corset will have made banks more cautious. Furthermore even during the periods that the corset was not in existence the threat of its reoccurrence tended to keep the banks within the boundaries. However as the corset was focused on punishing the bank system as a whole (penalties were only incurred when the system as a whole exceeded the target) some banks were reluctant to 'lend beyond a point, on the basis of wholesale (not retail) deposits (Dow and Saville 1988, pp154). This means that many of them did not benefit fully from the transfer provisions in the scheme meaning that its aim of preserving inter-bank competition was not entirely achieved. Before Mrs Thatcher came into power the UK was utilising a scheme known as the 'corset' as a tool of monetary control. The corset was essentially intended to control the amount of resources available to banks for lending to other sectors of the economy. The corset only applied to sterling deposits, thus all non interest bearing deposits were excluded under the assumption that 'banks did not, and presumably could not vary these to accommodate changes in the demand for credit' (Bank of England Quarterly Bulletin 1982, pp77). Therefore to control the amount of sterling deposits the government laid down targets for the growth of sterling deposits. As an example when the corset was introduced the acceptable growth target was 8% over the first six months and then 1.5% per month thereafter (Dow and Saville,1988, table 10.1). To control growth of sterling deposits penalties were imposed upon any bank whose deposits exceeded these target rates.
             In 1979 Margaret Thatcher and the Tory government were elected into power and with that came the introduction of monetarist economic policies. When Mrs Thatcher came power her primary concern was to restore the competitiveness of the UK. Britain was at the time facing drastically high lev...