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Simon English: The next bank crisis- this time it’s only us that goes bust

Simon English: The fallout from the latest borrowing binge won’t be pretty: REUTERS
Simon English: The fallout from the latest borrowing binge won’t be pretty: REUTERS

Arriving at work each morning in this office 10 years ago was a daily trial in being biffed about the head.

Overnight, some calamity beyond imagining would have occurred, some giant bank somewhere would have revealed itself to have debts of a gazillion against assets of little more than the chairman’s belly fluff.

When the mighty Citigroup seemed on the verge of collapse, this felt like the biggest biff of all. The (relative) youngsters among us asked the (increasingly) white-haired correspondents, what does it mean? “It means the world has run out of money,” came the reply. This sounded bad, and was.

Ever since then, there’s been a race to spot the next big financial crisis, the next banking crash. So far, we’ve spotted 97 of them and predicted all eight of the last two recessions.

And so to consumer debt, which landed on the front pages this morning after a warning from the Bank of England.

Household debt is out of control said Alex Brazier — the man whose job it is, apparently, to shout “fire” in a crowded theatre and trust this calms everyone down.

It is “dangerous to borrowers, lenders and most importantly… everyone else in the economy”, said Brazier, who’s lately been feeling faint and complaining of chest pains.

Brazier has a point, of course. You don’t have to pay much attention to see that there are millions of us living in houses we could no longer afford to buy, taking holidays-of-a-lifetime every six months and driving cars that are flashier than our salaries. We think we are due these things, it seems.

We’ve been assured that interest rates are low and staying low, even if on credit cards they never were, as the monthly bill attests.

For all that, this isn’t another bank crisis. The good news is that banks are so much better-capitalised in the wake of the last crash — regulators and politicians did well — that they should weather almost any downturn.

Last time around, the whole trouble was that no one understood the risk, no one could see when the dominoes would stop falling. This time, most people get it.

The banking system is basically fine. As regulators tighten underwriting standards, a small number (one hopes) of people will get burnt.

Some lending platforms will go bust, none of them big enough to drag down others.

The fallout from the latest borrowing binge won’t be pretty and there is clear cause for concern. Just check Brazier’s blood pressure.

The difference is that last time, the banks went bust at our expense. This time, we will go bust at theirs. This is way better.