“Bigger Systemic Risk” Now Than 2008 – Bank of England
The comments above & below is an edited and abridged synopsis of an article by Mark O’Byrne
The Bank of England and its regulatory arm, the Prudential Regulation Authority (PRA) say that many banks show signs of making the same mistakes that led to the 2008 financial crisis, the outcomes of which are predicted to be worse than nine years ago.
Increased risks have been noted at different ends of the financial system, from the European corporate bond markets right through to retail lenders. The Bank of England concludes that the corporate bond market could create more instability during the next financial shock than it did in the crisis of 2008.
The PRA’s chief executive Sam Woods told lenders they were on thin ice with innovations designed to reduce capital requirements and buoy earnings. He said that while these tools might meet regulations, they must not be designed to circumvent banking rules.
Institutions circumventing regulations and non-bank corporate lenders creating more risk leads to speculation over whether the financial system can look after the needs of borrowers and savers. It also raises concerns about how safe the banks are for depositors and savers.
These warnings remind us that there is little in the financial system that is not exposed to the highly speculative and risky lending practices of those charged with looking after our savings and investments.
Even if some banks listen to regulators’ warnings, the level of debt in the UK’s financial system—and most western countries—is completely unsustainable.
Your personal finances and savings held in deposit accounts are at risk; when authorities move to bail out the next bank that enjoyed the punch too much, your savings may be confiscated in bank deposit bail-ins.
“Why do we like physical gold and silver?” says O’Byrne. “Because when you buy it in the right way, you own it outright.”