Former British Prime Minister and former Chancellor of the Exchequer Gordon Brown is warning that the financial crisis is not over and that the shadow banking sector should be watched carefully. Speaking on Radio 4’s “Today Program,” Brown said there could be “grave difficulties” for some companies as interest rates rise, particularly for the unregulated shadow banking sector. Given inflation, there is a potential for liquidity and solvency problems amongst companies, and the potential for markets to become dysfunctional.
“I would be worried about shadow banking—that’s the non-bank financial sector in this country. And I would be very careful if I was the Bank of England and make sure that the supervision of that part of the economy is tightened up.... I do fear that as inflation hits, and interest rates rise, there will be a number of companies and organizations that will be in grave difficulty.”
