What is the Credit Crunch and will it affect you? We will explain the first part of
this and the answer to the second part, will it affect you is YES! The Credit
Crunch is when banks stop lending money to each other; this is generally in the
form of short...
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What is the Credit Crunch and will it affect you? We will explain the first part of
this and the answer to the second part, will it affect you is YES! The Credit
Crunch is when banks stop lending money to each other; this is generally in the
form of short term loans made between banks to balance their books.
Why does this
happen?
It is because the banks do not trust the financial stability of other banks and are
afraid that they will not get their money back.
This is what led to the demise of
Northern Rock and Lehman Brothers.
Are the banks not stable, yes the UK banks are
better capitalised than the European Banks, but there is a worry that some of the
European banks are over exposed to loans they have made to Ireland, Greece,
Portugal, Spain and now Italy.
If anything happened to the European banks then this
will have a domino effect on the UK?s banks.
King is already saying to the UK Banks that they should build up their capital
reserves against events that are happening in Eur
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