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Ben Chu

Ben Chu has been a leader writer at The Independent since 2004. Before that he worked at the paper on the comment desk, letters department and the personal finance pages. He studied history at Jesus College, Oxford between 1997 and 2000.

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Mervyn King is still stressed about lending

Posted by Ben Chu
  • Wednesday, 17 June 2009 at 07:02 pm
A sobering line in Mervyn King's Mansion House speech last night: "Stress tests designed to assess the viability of banks are very different from tests of the capacity of the banking system to finance a recovery".
           This echoes my own doubts, expressed
here, about the true health of the banking sector. The markets seem to have interpreted the fact that US and UK banks have passed the stress tests set by our financial authorities as an indication that the economic party is due to restart. 
           But even leaving aside the doubts about the rigour of these exercises (listed
here by the admirable Yves Smith on the Naked Capitalism site) what these tests show is that the banks will survive a deep recession - not that they will provide the credit that a strong recovery would require.
           The Governor also delivered what I thought was quite a good joke: “ 'My word is my bond' are old words, but they were important. 'My word is my CDO-squared' will never catch on."
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