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Prevent repeat of credit crunch
A new report produced by The Bank of England advocates reform to the financial system that may help to prevent a future repeat of the credit crunch.
The Bank’s Financial Stability Report recommends that lenders should adhere to stricter requirements over the level of capital and liquidity they have, as well as there being constraints built into the system to lower the risk of boom and bust.
The Bank’s financial deputy governor for financial stability Sir John Gieve said: “That means not just increasing capital and liquidity requirements for individual institutions but relating them to the cyclical growth of risk in the system more broadly.”
One finding of the report was that an immediate collapse has been averted by recent government action to increase capital and liquidity.
A paper out this week from the Centre for Economics and Business Research has said that this will lead to a gradual increase in the availability of mortgages in the coming months.
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