Cyprus? There but for the grace of God goes Britain
There’s been a lot of head shaking in recent days about the size of Cyprus’ banking sector relative to its economy.
And it is indeed grossly inflated with assets and liabilities at around €126bn, or 700% of the island’s GDP.
If you have a banking sector that size you’re asking for trouble – for how can a state guarantee for depositors be credible? If the banks go under the state wouldn’t be able to rescue the savers.
Yet we’ve nothing to be smug about here in Britain.
This chart (below) from Albert Gallo, an analyst at RBS, shows that we’re not that far behind. Despite all the deleveraging of recent years our banking sector still has assets and liabilities equal to 450% of our GDP.
Remember this next time you hear from one of the banking industry lobbyists how vital it is for the UK’s economic future to have a massive banking sector. Remember Cyprus.banks, Cyrpus
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