Not that losing my life savings would be a life-changing event, because I don’t have much – but as I do not believe in investing in shares, the little savings I have are in a bank account, a British bank account. And that’s the problem.
The guy from the European bank was telling the interviewer, Evan Davis on Radio 4, why it was OK to snatch the money from Cyprus personal and corporate accounts. “Its completely different from Spain or Italy” he said. “You see, Cyprus is overbanked – I mean the amount of money deposited in banks in Cyprus is about eight times their national GDP.”
Of course he did not say what it was in Spain or Italy, but I thought ‘Now, where have I heard that before?’ Well, Iceland’s banks were leveraged to 9 times GDP just before that country went bust in 2009. And Willem Buiter said that in 2009 the UK High Street banks alone were holding liabilities of 440% of GDP, so I think its a fair guess that UK banks are holding at least 800% of GDP in liabilities – perhaps even 1600%. After all, the UK is the world’s second financial center after New York and is well-known for its light-touch, or soft-touch regulation – if anyone knows the correct figure, please do add a comment.
Needless to say, Evan Davis, did not ask the obvious question, ie if it could happen to Cyprus, then could it happen to the UK? But he is quite good at reading the stories from the newspapers in the morning, which saves having to do it oneself.