The world is not on the cusp of another banking crisis of the scale of the 2008 crash, despite recent jitters in the market, Bank of England governor Andrew Bailey has said.
Speaking in Washington DC, he said the banks themselves are in a better position than they were, and that authorities also have better tools to deal with any potential problems.
“I do not see the evidence that we’ve got on our hands what I would call the makings of a 2007/08 financial crisis,” Bailey stated at an event hosted by the International Monetary Fund in Washington on Wednesday evening UK time.
“I think the system is in a much more robust condition – that’s the first point of defence.
“The second point of defence is that we’ve got a lot more tools in our armoury to deal with these things than we had in 2007 and 2008 when we were somewhat making it up as we hit the crisis.”
But he also said there were things to learn from the recent problems in the sector, including the speed at which bank runs can happen with modern technology and the portion of uninsured deposits in banks.
Earlier in the day, Bailey said the reforms that were put in place after the 2008 financial crisis “have worked”, and banks in the UK are in a good position.
“In recent weeks we have seen the crystallisation of problems in a few parts of the banking sector,” he said at the earlier event hosted by the Institute of International Finance.
“This is against a background of a necessary sharp tightening in monetary policy to bring down inflation from levels that are much too high.
“All of this has to be set against the most serious global pandemic for at least a century and the most serious war in Europe since 1945.
“Let me therefore draw a first set of conclusions and propositions from what is going on.
“The post-crisis reforms to bank regulation have worked, today I do not believe we face a systemic banking crisis; when I look at the UK banks, they are well capitalised, liquid and able to serve their customers and support the economy.”
But he added that the current size of protections for bank liquidity might not be right in the future.
The UK’s economy showed no growth in February, but continued to narrowly avoid dipping into a recession despite decades-high inflation.
Teachers’ and Civil Service strike action acted as one of the biggest drags on gross domestic product (GDP), with thousands of workers walking out during the month.
The decline in the services sector offset growth in the construction sector, which saw a rebound particularly due to more mild weather and from new work and repairs.
Analysts had expected GDP to grow by 0.1% in February, month-on-month, according to a consensus forecast supplied by Pantheon Macroeconomics.
To two decimal places, the economy eked up by just 0.02% in February.
But looking at the broader picture, GDP grew by 0.1% in the three months to February.
It comes as the ONS said the UK’s consumer prices index (CPI) inflation rate surged to 10.4% in the same month, unexpectedly jumping higher despite efforts from the Bank of England to pull it back to its 2% target.
Chancellor Jeremy Hunt said: “The economic outlook is looking brighter than expected – GDP grew in the three months to February and we are set to avoid recession thanks to the steps we have taken through a massive package of cost-of-living support for families and radical reforms to boost the jobs market and business investment.”
The economy grew by 0.4% in January, revised from the 0.3% the Office for National Statistics (ONS) previously predicted, meaning it saw a slowdown the following month.
Nevertheless, the UK avoided falling into a recession at the end of last year, with GDP edging up by 0.1% over the final three months.
A recession is generally defined in the UK as two quarters of declining GDP in a row.
GDP would need to sink below 0.6% in March for the economy to have shown negative growth in the latest quarter, the ONS said.
Its director of economic statistics Darren Morgan said: “The economy saw no growth in February overall.
“Construction grew strongly after a poor January, with increased repair work taking place.
“There was also a boost from retailing, with many shops having a buoyant month.
“These were offset by the effects of Civil Service and teachers’ strike action, which impacted the public sector, and unseasonably mild weather led to falls in the use of electricity and gas.”
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