- Title: The financial crash: 10 years on since ECB's bold move
- Date: 9th August 2017
- Summary: LONDON, ENGLAND, UK (AUGUST 9, 2017) (REUTERS) (SOUNDBITE) (ENGLISH) NEIL WILSON, SENIOR MARKET ANALYST, ETX CAPITAL, SAYING: "Banks in particular have stronger capital buffers and rules in Europe and in the US, Dodd-Frank and so on, are designed to protect the financial system a bit more. We think central banks are probably a lot more attuned to the kind of risks that might stem from credit drying up and so on. But on the other hand, we see that the financial markets may be just as liable to crash again. We've got arguably a bubble in the bond market that once it goes, once it pops, then that could roil the entire financial system, and the growth of passive funds and that kind of thing which could exacerbate any kind of run. And I don't think, I would disagree with Janet Yellen in believing that that we won't see another crash. I think that there will be there will be another one at some point and that is inevitable."
- Embargoed: 23rd August 2017 16:59
- Keywords: financial crash 10 years anniversary ecb fed boe markets
- Location: LONDON, ENGLAND, UK / NEW YORK CITY, NEW YORK; CHICAGO ILLINOIS; DEDHAM, MASS; UNITED STATES / FRANKFURT, GERMANY
- City: LONDON, ENGLAND, UK / NEW YORK CITY, NEW YORK; CHICAGO ILLINOIS; DEDHAM, MASS; UNITED STATES / FRANKFURT, GERMANY
- Country: Various
- Topics: Economic Events
- Reuters ID: LVA00B6TFQ4JX
- Aspect Ratio: 16:9
- Story Text: Ten years ago to the day (August 9), the European Central Bank pumped 95 billion euros into the banking system to prevent it from seizing up, marking the start of the global credit crisis.
At the time, it was the biggest ever injection of funds into financial markets and probably the most stunning single central bank action to date.
Though the ECB was rightly seen as the vanguard of crisis prevention back then, it soon fell in the slipstream of other central banks - notably the Federal Reserve and Bank of England - who adopted much more aggressive and unconventional policies as the crisis unfolded.
Tensions suddenly appeared on Aug. 9, 2007, when French bank BNP Paribas shut off access to three mortgage-related funds. It was the clearest sign to date that the financial system was malfunctioning and by common consensus was the start of the global crisis.
At the time, 95 billion euros was an astronomical sum which many observers believed would unblock the global money markets through which trillions of dollars of interbank lending flows and upon which the world economy and financial system is built.
That more muddled navigation was encapsulated best by a premature interest rate rise just months before the Lehman Brothers collapse in 2008 and also an inability to contain the early wildfires of the euro debt crisis in 2010 and 2011 - at least not until ECB President Mario Draghi's dramatic intervention in mid-2012.
It didn't prevent the biggest financial crisis since the 1930s, the first contraction in global output in decades, or stave off the euro zone crisis that followed and which came close to blowing up the entire single currency project.
And it proved to be a drop in the ocean of trillions of euros, dollars, pounds, yen and yuan liquidity and guarantees that central banks and governments around the world were ultimately forced to provide and are still providing.
Under Draghi's presidency - mostly after the euro crisis threatened to bring the entire single currency edifice crashing down - negative interest rates have been imposed and the ECB has bought over 2 trillion euros of government and corporate bonds.
- Copyright Holder: REUTERS
- Copyright Notice: (c) Copyright Thomson Reuters 2017. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Usage Terms/Restrictions: None