Banks' £1.8tn credit crunch hit
Updated on 28 October 2008
Financial institutions have racked up losses of £1.8tn since the start of the credit crunch, says the Bank of England. Bridgid Nzekwu reports.
The losses were incurred on mortgage bank bonds and other investments, according to the bank's Financial Stability Report.
It warns that banks need to reduce their reliance on wholesale money markets and to increase customer despoits.
At the same time, the number of homes repossessed in the three months to the end of June was more than 70 per cent higher than in the same period last year while house prices have FALLEN by a record 8 per cent.
The report also calls for a "fundamental rethink" of risk, involving the introduction of checks and balances to avoid a repeat of the current crisis, and including measures to peg back the growth in banks' balance sheets to the size of their capital.
Today's report is published to the background of recent warnings of a UK recession by the prime minister, Gordon Brown, and Mervyn King, governor of the Bank of England.
