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Banks should save ‘in times of boom’

29/09/2008

Economic crises could be avoided if banks put money aside for a rainy day, said Sir John Gieve, Bank of England deputy governor.

“We need to create reserves based on macroeconomic factors, which can be drawn down as the cycle turns down and have to be replenished on the upswing when profits are high,” he said.

A practice such as this, the Guardian reports, could ‘prevent banking crises like the current one pulling down whole economies in their wake’.

Today’s economic troubles are pushing many into debt, and preventing many others from accessing the debt consolidation loans which could help them manage their debt and regain control of their finances.

But greater reserves could dramatically reduce the impact of any credit crunch by making banks less reluctant to grant debt consolidation loans, mortgages and other forms of credit.

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