We remember the weekend collapse of Lehman Brothers’ investment bank in October 2008. A recent survey of Britain’s senior bankers reveals that over half of them fear a Lehman-like event in Europe.
[Note: “City” refers to the banking section of London that exists as a separate legal jurisdiction. It is shorthand for “Wall Street.”]
A survey of 68 top City institutions by the Bank of England found that 54pc of respondents reckoned the probability of a short-term “high-impact event” to be “high or very high” – a level not witnessed since the survey began in July 2008, just two months before Lehmans’ tipped the world into recession. Respondents said they feared a eurozone debt crisis and another economic downturn most.
The findings underline the scale of the crisis the UK faces if Europe’s leaders can not strike a deal to calm bond markets. Last week, the Bank warned that the UK was on the brink of a second credit crunch as the eurozone crisis has caused funding markets to dry up.
According to the Bank’s twice-yearly Systemic Risk Survey, funding risk is also at its highest level on record, with 57pc of respondents citing it as a major concern – a reading only surpassed by sovereign debt risk and a slide back into recession. Last week’s Inflation Report revealed that banks’ funding in the three months to September had also fallen to levels not seen since Lehmans collapsed.
The article goes on to say that Fitch, the American credit-ratings agency, confirms this sentiment. American money market funds have pulled money out of Great Britain’s banks. They have pulled out 25% since May. They have pulled out 42% from the eurozone banks.
Two-thirds of the respondents are worried about a crisis in the eurozone. “Some 68pc of respondents to the Bank’s survey raised concerns about European sovereign risk, including fears of a break-up of the euro, disorderly debt restructuring, or sovereign default.”
These are the experts. If they are fearful, the public should be. But voters pay no attention.
I hope you pay attention.