Britain ‘Might Not Cope With Another Bank Emergency’
Posted By thestatedtruth.com on June 30, 2010
So, the big question is….can the U.S. cope with another banking emergency?
By Sean O’Grady and James Moore
Tuesday, 29 June 2010
Britain’s mountain of debt could leave the country powerless to launch another rescue bid in the wake of a fresh financial crisis, the world’s central bankers warned yesterday. Their “club” – the Bank of International Settlements – presented in its annual report a frightening picture of the impact of a second banking emergency on heavily indebted nations such as Britain.
The Bank of England’s Governor, Mervyn King, has estimated that the Government has pumped as much as £1trillion of taxpayers’ money into the banking system. Billions of pounds were spent part-nationalising the Royal Bank of Scotland and Lloyds Banking Group, as well as fully nationalising Northern Rock, in an attempt to stave off collapse. Measures such as the “special liquidity” scheme propped up other lenders and prevented the system from freezing up.
But a BIS report warned yesterday that repeating these measures could be impossible. It said: “Events coming out of Greece highlight the possibility that highly indebted governments may not be able to act as a buyer of last resort to save banks in a crisis. That is, in late 2008 and early 2009, governments provided the backstop when banks began to fail. But if the debts of the government itself become unmarketable, any future bailout of the banking systemwould have to rely on external help.” Central bankers fear Europe is running out of “external backstops” that could step in, other than the US and the International Monetary Fund. This has unnerved capital markets in the EU, prompting some sharp swings in the value of shares and other financial instruments in recent days.
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