A domino effect of events then occurred, starting with French bank, BNP Paribas, freezing funds which were exposed to those US sub-prime mortgages. Banks stopped lending to each other, the financial system seized up and six weeks later, the first run on a UK bank in more than 100 years happened, resulting in the end of Northern Rock. Next came the failure of several other national banks who required government bailouts.

A year later in 2008, the collapse of Lehman Brothers, the largest bankruptcy filing in US history, caused global markets to collapse – AKA the Credit Crunch. The EU debt crisis arose in 2009 as several EU member states were unable to repay their government debt. The consequences of these events combined created the most devastating global financial crisis since the Great Depression of the 1930s.

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There was a realisation that excessive risk taking had been at play using complex financial vehicles which were difficult to understand. The situation was so complicated that many people still don’t really understand what happened, so let me try and bring some clarity to it.

The effects were felt most in the banking system because it has a critical role in the global transmission of money. Banks provide loans to customers and to each other, and a safe home for individual and corporate deposits. However, the banking model has its risks and key areas which could give rise to failure or collapse. These are internal structure, interbank connections, external factors and of course, human intervention or psychology.

Internally, for example, a bank’s liquidity can be affected when depositors suddenly require a large amount of cash back which is tied up in lending. Banks enabled households, governments and corporates to become highly leveraged through the supply of debt on an increasingly thin capital base, which contributed to increased vulnerability in the global financial system. At an individual level, people were living off their credit, unable to repay it at a moment’s notice. The debt they owed significantly outweighed money they held in savings. On a corporate level, it becomes much more complicated.

Global Interbank connections, where banks lend to one another, makes them intricately linked to one another. The failure of Lehman Brothers demonstrated only too clearly and painfully how this risk can manifest itself.

Human intervention and psychology also has a significant effect – sentiment can drive markets, overly optimistic growth strategies, ineffective management, rogue employees, fraud, speculation. Even Gordon Brown, the UK’s Chancellor at the time was advocating the end of ‘Boom and Bust’. His attempt to explain the stability of the UK’s system, human nature took to mean that we couldn’t possibly fail and would only grow. One of many factors leading to more risk being put on the table.

The aftermath of a collapsing bank has long lasting effects on an economy including job losses, creation of financial hardship, loss of tax revenues and increase in government debt. The events of a decade ago was so significant we are still feeling the effects, although recovery has been significant.

The UK Government has only recently sold its final stake in banking group, Lloyds, but still has some way to go to reclaim the debt used to bail the banks out. For the first time since 2010, all the major UK banks have recorded a profit for the first half of this year. The Royal Bank of Scotland for example, still 71% backed by the UK government, recently reported a net profit of £680m for the second quarter of the year. Although a swing into positive territory, £342m was earmarked to clean up legacy issues left over from the Crisis.

At the time of the Crisis, many central banks were caught off-guard due to lack of clarity around regulation and what remedies to put in place to fix it. Added complexity arose where coordination was required across numerous agencies. The Crisis revealed that market cycles and trigger events were not sufficiently researched or understood in order to anticipate it happening.

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The Governor of the Bank of England (BoE), Mark Carney, has been keen to ensure lessons are learnt. He remains very much on guard in terms of the BoE’s role. Talking about this milestone anniversary, he predicted that the UK’s financial sector could double in size in the next 25 years, meaning more jobs, tax revenues and exports. However, he also warned that rapid expansion should not be allowed or the government bend to pressure to water down regulation post Brexit, if it meant a repeat of the triggers which led to the events of a decade ago.

Carney’s message is a positive one, but comes with a caveat. A ‘lest we forget’ warning to the industry. Brexit will be the next game changer for the UK’s economy and Carney believes that we can have, and should have, ambitious growth plans but it must be safe growth. The UK must effectively manage the risks versus the reward, ensuring all the checks and balances are in place, yet continue to innovate and look for business opportunities outside the EU.

And what about Jersey’s economic future? Ten years since the crisis, Jersey continues to prove itself to be markedly resilient. Employment within Jersey’s finance industry is back close to pre-crisis levels, although the mix has changed with less banking roles and more roles in trust and funds. The Island also retained its AA-/A-1 credit rating from Standard and Poors, one of the highest possible ratings, which is partly reflected by the stability of our finance industry. We have demonstrated strength in Jersey’s industry and the Island’s appeal as a leading international finance centre, all the while adapting to the new post-crisis reality, which needs to continue.

We are not sitting back waiting to see how the UK’s situation unfolds, but are actively engaged and working together to ensure that Jersey’s position is recognised, protected during this period and ready for growth opportunities. It is both a non-EU country with strong links with EU member states and a jurisdiction whose close partnership with the UK remains unchanged following the UK’s decision to leave.

Jersey continues to innovate, extend its reach to emerging markets and nurture its relationships with longstanding financial centres, whilst further reinforcing the trusted regulatory and legislative environment that underpins our substance as a jurisdiction of choice.

In the last decade, the financial world has had to rebuild itself and regain the trust of investors. Effective and robust regulation has been a key tenet to regaining trust but not to the detriment of innovation and change. Jersey is certainly not sitting still in this regard and is looking toward the future.