A study by the Adam Smith Institute (ASI) said the Bank’s tests – designed to measure whether a bank could withstand a severe financial shock – give false comfort by overstating the resilience of the finance sector.
“It is disturbing that 10 years on from Northern Rock, the best measure of leverage – those based on market values – indicate that UK banks are even more leveraged than they were then.
“The biggest risk facing the UK banking system now is the Bank of England’s own complacency.”
The report said high bank leverage had helped fan the flames of the financial crisis, while market valuations of UK lenders indicate that some have hidden losses.
And for those thinking, “I’m OK, I don’t have my money in UK Banks.” Do you believe that the banks in Europe are any better? Just look at the current state of Italian banks. And then there’s the recent collapse of Banco Popular, the 6th largest bank in Spain, which only last year passed the stress tests with flying colours.
The collapse of Northern Rock didn’t just highlight the fragile state of the banking sector across the world, it has caused repercussions still being felt 10 years on; pensioners and savers are still suffering due to low interest rates, which have meant that in real terms they are losing money year on year as they are unable to keep up with growing levels of inflation.
In September 2007, a £40,000 savings pot would have earned a couple annual interest of £2,679, when the best rate on an easy access savings account was 6.5%, from West Bromwich Building Society. This compares to today’s best-buy rate of just 1.25% from Ulster Bank. This would generate a paltry £503 over 12 months — or £2,176 less.
Today, the only real alternative that can possibly offer the potential to outperform inflation is investing your money.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
One of the best pieces of semi-financial advice I ever received was about buying clothes: buy good quality (obviously) and then have the garment altered to fit me specifically; sound financial and sartorial sense. Of course, this means going a little further than one might normally when buying a new outfit, but it’s a little extra that I think is more than justified in the end. Ready-to-wear clothes are great without doubt, but having something that fits you perfectly gives a continued feeling of satisfaction with every wear, it’s so worth it. There are parallels to be made in my professional life as well; it’s such a pleasure to be able to offer clients advice and products that are tailormade to their requirements and fit their circumstances perfectly.
To help tax authorities in various countries hunt out those individuals and companies trying to hide assets, the UK has recently signed a disclosure of asset agreement with Spain, Germany, France and Italy. What does this mean? It means that the UK, in partnership with France, Germany, Spain and Italy, have passed regulations that will lead to the automatic sharing of information about the true owners of companies, complex shell companies and overseas trusts.