Thursday , March 30 2017
Home / Spectrum / ‘STORM IS COMING’ Top economist warns financial disaster looms as banks are not prepared

‘STORM IS COMING’ Top economist warns financial disaster looms as banks are not prepared

Sir John Vickers warned that British financial system is in danger of a major collapse.

Britain’s banks and financial systems are still too fragile, which could lead to another disaster in the face of a big downturn, blasted the economist who led the Independent Commission on Banking.

Sir John told ITV News: “A storm is going to come, we can’t predict when, but you want to be ready for it.

“That’s why you want the building structure to be strong, sound, resilient, well in advance of the bad weather arriving and I think we have strengthened the buildings, the financial system in the UK and internationally.

“But we haven’t done so enough. We need to do more and then when the next very severe storm comes, who knows when, we will be in a better position than we are currently on track to be.”

Sir John was asked by the Government to come up with reforms to make the banking system safer, but said the so-called stress tests decided by the Bank of England are not good enough.

It means the banks are not as safe as they should be and remain a huge risk to the economy, said Sir John.

Under the system balance sheets are tested to see how they would fare in shock market conditions.

The Royal Bank of Scotland failed the health check carried out at the end of last year and was ordered to strengthen its position.

Overall authorities are not are asking banks to hold enough cash to ward off trouble in tough conditions, warned Sir John.

He said: “Even almost 10 years from the crisis we are allowing our banks to run with exposures, lending, other trading positions and all the rest of it, which is a huge multiple of the shareholders capital in those banks even relative to the regulatory measures of that capital.

“If you had the market measure then the multiple would be even bigger – we’re looking at numbers like 30 x shareholders equity.

“I think that’s not a safe way to run the economic system.

“If we had another economic crisis with the public financiers more exposed than they were last time around goodness knows what would happen.

“I think we are in an unnecessarily fragile position.”

(Express.co.uk)

Check Also

Fighter Jet Intercepts Passenger Plane As ‘Huge UFO’ Speeds Past! (VIDEO)

UFOlogists are salivating over this footage of an alleged unidentified flying object. Astounding footage of …

Close
Please support the site
By clicking any of these buttons you help our site to get better
Social PopUP by SumoMe