RBS, still over 70% state-owned, is the worst prepared of the UK’s biggest banks to cope with the next financial crisis, a crisis which is very rapidly developing.
his is the finding of the Bank of England (BoE) stress test. However, RBS is not alone. It failed the stress test while the Barclays and Standard Chartered banks also ‘missed key hurdles’.
As is well known, bankers never learn any lessons from the previous collapse. They make their super profits while they are able to do so, and then when the big bubble that has been created bursts, rely on the state to rescue them, looting the working class in the process for decades ahead, or simply ruin their depositors by going bust, all the while weeping the most crocodile of tears.
RBS has recently been found out ruining small businesses for its own profit when it was meant to be rescuing them! You can’t change a banker’s spots! The stress test was in fact of a very dubious nature since it was based on what the Bank of England dubbed a ‘doomsday scenario’ where economic growth plunges to levels seen during the financial crisis of 2008.
However, the debt run up by capitalist states is today much higher than what it was in 2008. The continuation of quantitative easing programmes of governments, supplying free electronic money to the banks, has seen to that. Then there is the Trump factor to come, with his programme for the US government to make truly massive borrowings.
The debt crisis in itself is much more severe and much more explosive than in 2008. Stress testing, as if we were back in 2008, is in fact an attempt to fool the people. However the biggest banks cannot even pass this type of test.
In fact, the Bank of England considers that the UK’s reliance on foreign money to finance its trade deficit (the ‘kindness of strangers’) combined with its ‘vulnerability’ in that it provides financial services to the bankrupt European Union, plus the rapid rise in Chinese debt – China being the UK’s major ‘economic partner’ – has made the world a much more dangerous place for British capitalism and its banks than it was in 2008.
Yesterday, Bank Of England governor Carney revealed that there has also been a huge rise in UK household credit card debt. The Bank of England figures showed that credit card lending is at a record level, up by £571m in the last month!
Overall unsecured debt – which includes overdrafts – is rising at its fastest pace for 11 years. The Banks Stability Report showed that the overall ratio of household debt to income was 133% in the second quarter of 2016. The UK is becoming a nation of paupers!
A rattled Carney assured his audience that the rules on risky mortgage lending would remain as they have been for the last two years. In June 2014, lenders were told they could not lend any more than 15% of their loan book to people borrowing more than 4.5 times their annual income – so-called riskier mortgages.
The bank however noted that the coming rise in interest rates makes for a ‘highly uncertain’ housing market. On top of this, the Bank of England Stability Report found that UK financial stability was dependent on an orderly exit from the European Union since the UK banks provide more than half of debt and equity issuance by continental firms, and account for more than three quarters of foreign exchange and derivatives activity in the EU.
‘If these UK-based firms have to adjust their activities in a short time frame, there could be a greater risk of disruption to services provided to the European real economy, some of which could spill back to the UK economy through trade and financial linkages,’ the Bank said, warning of a crash.
UK capitalism is in big trouble and it is heading for the rocks on all fronts. It clearly cannot offer the working class in the UK any future outside of joblessness, homelessness, ruined savings and growing food bank queues. The working class only has a future in a socialist UK as part of a Socialist United States of Europe.
This means that as the crisis of UK capitalism deepens the working class must organise a socialist revolution to expropriate the bosses and the bankers as part of the struggle for a Socialist United States of Europe.
