Higher interest rates would help bring normality back to the banks
The BOE’s Financial Policy Committee (FPC) sees risks to medium- term financial stability, and one of the major risks is a the search for a yield
It was that search which contributed to the original credit crisis. Then, as now, investors’ search for acceptable returns resulted in the under-pricing, and misunderstanding, of risk. It’s also the context against which the FPC is now arguing that banks may well need to be recapitalised again, in a rerun of 2008. On the evidence of Thursday’s report, not much has changed over the past four years, which is a worry.