Alistair Darling warns on UK economy 10 years after the financial crisis

Helen Cahill
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Rising consumer debt could become a problem if interest rates are increased, Darling said (Source: Getty)

Ten years since the start of the financial crisis, former chancellor Alistair Darling has warned that regulators can not be complacent about the stability of the British economy.

Darling, who steered the UK economy through the 2008 recession, told the BBC that mounting consumer debt was a key issue.

This, combined with a Brexit-related slowdown in the economy, should raise "alarm bells", he said.

Read more: The financial crisis 10 years on: A timeline of the crash

He added: "The lesson from 10 years ago is that something that can start as apparently a small ripple in the water can become mountainous seas very quickly."

On this day in 2007, French bank BNP Paribas blocked investor withdrawals from three funds which were exposed to US subprime mortgages. It could not determine the value of the collateralised debt obligations in its portfolio, which were made up of home loans made to borrowers likely to default on payments.

Weeks later, customers flooded to branches of Northern Rock, the UK's fifth-largest mortgage lender, after it approached the Bank of England about taking out a loan. Darling was forced to step in to support the bank's liquidity requirements.

"In the early stages it looked (like) there was just a problem with [the bank] Northern Rock," Darling said today.

"However, it became clear as we went through August of 2007 that more and more banks were becoming reluctant to lend to each other - which was extraordinary at that time - and that there was a more deep-seated problem."

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