Brace for defaults as rates climb, banks are warned

clock

Banks need to prepare for market turmoil once central banks start to raise interest rates and unwind quantitative easing, a leading policymaker has said.

Donald Kohn, a former vice-chairman of the US Federal Reserve's board who now sits on the Bank of England's financial policy committee, said that exit from the present emergency policy was "not without its risks and dangers", the Times reports. He urged them to be ready for defaults, an increase in borrowing costs and a liquidity crunch as monetary policy across the world is returned to normal. Bank of England governor Mark Carney (pictured) has said he expects interest rates to start to rise next spring.

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Economics / Markets

Four potential 'black swans' for 2025

Four potential 'black swans' for 2025

'Four unlikely but nonetheless plausible scenarios'

Nathan Sweeney
clock 03 January 2025 • 4 min read
What two pizzas tell us about Bitcoin

What two pizzas tell us about Bitcoin

Laszlo Hanyecz really needed a slice...

Laith Khalaf
clock 19 December 2024 • 6 min read
Rise in UK inflation 'unwelcome' ahead of BoE interest rate meeting

Rise in UK inflation 'unwelcome' ahead of BoE interest rate meeting

Bank of England MPC meeting due on Thursday

Sorin Dojan
clock 18 December 2024 • 3 min read