Britain Has World's Most Over-indebted Banking System

Britain now has the world’s most over-indebted banking system, according to new figures from the International Monetary Fund.

The Fund’s Global Financial Stability Report has revealed that the total gross debt of Britain’s banks is equivalent to 742% of the UK’s total economic output – equivalent to around £11 trillion.

Not only is this bigger than the 547% of GDP total in the last report in September, it means Britain has overtaken Ireland, whose banking system’s debt is equivalent to 691% of GDP.

The figures, which can be seen in this IMF chart, and are covered in more detail in a previous blog, will cause some concern, since they underline how exposed Britain is to the crisis.

Nonetheless, on many other measures, Britain remains in good relative health. For instance, though its banks have a lot of debt, their leverage ratio isn’t all that bad in comparison with other countries (take a bow, Belgium and Germany).

Even more striking is the state of household balance sheets. The IMF figures show that in net terms (in other words when assets are taken into account), Britain’s household balance sheets better-placed than Germany’s. Net UK household debt is -178% of GDP. Germany’s is -118% of GDP.