Former Bank of England deputy governor Charlie Bean says he is fearful of another financial crisis and warns policymakers wouldn’t have as much room for manoeuvre as they did in 2007.
Bean, who was the Bank’s chief economist when the financial crisis hit a decade ago, told City AM he is puzzled by the low level of risk priced in markets and says they are placing too much expectation on central banks’ ability to deal with another crisis.
“China has to be the most worrying part of the world,” Bean says. “Credit growth has been so high for so long, there has to be I think at some stage some correction there.”
A trigger could also come in the form of geopolitics, such as Brexit, Trump or North Korea, Bean warns.
“If there is a big shock, an adverse shock, today, the fiscal space is less than it was – the debt-to-GDP ratio is double what it was then… interest rates are close to the floor, and we’ve had very high levels of asset purchases.”
However, he says banks are more resilient now than they were the financial crisis hit.