A decade on, Bailey said the banking system is more stable, but faces different challenges.
“One striking change is that whereas a decade ago the challenge was to fund its balance sheets, today the greater challenge is to find lending opportunities that enable sustainable net interest margins to be earned,” he explained.
“Although, it is a simplification, assets often appear to be relatively more scarce than funding. The regulators watch carefully for excessive risk taking in lending because the temptation is there.
“Fortunately, the experience of the crisis has led to a radical overhaul of the regulatory tools to do this – with stress tests and enhanced asset quality assessment; it feels like a very different world.”
