Sir Mervyn King: Britain on the brink of second credit crunch, Bank of England Governor warns

Sir Mervyn KingBritain is on the brink of a second credit crunch, the Bank of England warned as it slashed its growth forecasts for the economy and raised the prospect of a double-dip recession.

The eurozone crisis has left UK banks unable to raise the funding they need to make loans to businesses, evoking the spectre of the crunch that followed the collapse of Lehman Brothers.And on one critical measure — the cost of insuring banks against going bust — lenders are already facing tougher conditions than at the height of the crunch, the Bank said.Sir Mervyn King, the Bank’s Governor, said that because of the eurozone crisis, households, companies and banks face a period of extraordinary uncertainty, including a possible slide back into recession. “There is weakness over the next few quarters. No one can know what precisely the outcome will be,” he said.

“In the last three years, we have seen extraordinary events. Who knows what’s going to happen tomorrow, let alone next month?”The banks can only issue loans to companies and home owners if they can find sufficient funding on the markets. According to the Bank of England’s inflation report, banks’ funding in the three months to September fell to levels not seen since Lehman Brothers, the US investment bank, crashed in September 2008. The eurozone crisis has left UK banks unable to raise the funding they need to make loans to businesses, evoking the spectre of the crunch that followed the collapse of Lehman Brothers.

And on one critical measure — the cost of insuring banks against going bust — lenders are already facing tougher conditions than at the height of the crunch, the Bank said.Sir Mervyn King, the Bank’s Governor, said that because of the eurozone crisis, households, companies and banks face a period of extraordinary uncertainty, including a possible slide back into recession. “There is weakness over the next few quarters. No one can know what precisely the outcome will be,” he said.

“In the last three years, we have seen extraordinary events. Who knows what’s going to happen tomorrow, let alone next month?”The banks can only issue loans to companies and home owners if they can find sufficient funding on the markets. According to the Bank of England’s inflation report, banks’ funding in the three months to September fell to levels not seen since Lehman Brothers, the US investment bank, crashed in September 2008. – Thetelegraph