of England (BoE)’s report on financial stability indicates a recession as
severe as that of the early 1990s would lead to credit losses of £130bn for
Britain’s six biggest financial institutions and could possibly also wipe out
the whole £50bn government-backed funding package.
The losses were predicted for the country’s five biggest banks and the
Nationwide Building Society if mortgage arrears and business failures rise as
high as in the last recession, The Times reports.
‘The instability of the global financial system in recent weeks has been the
most severe in living memory,’ Sir John Gieve, BoE deputy governor, financial
stability, said. ‘And with a global economic downturn underway, the financial
system remains under strain.
‘But it is better placed as a result of the exceptional package of capital,
guaranteed funding and liquidity support. That is helping to underpin the
banking system both directly and by demonstrating the authorities’ determination
to do whatever is needed to restore confidence.’
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