SIMON WATKINS

IS DEUTSCHE Bank another Lehman Brothers? Almost certainly not. But the two names have been harnessed together many times over the last week amid concerns over the German bank. Some commentators have suggested we are on the brink of another global banking crisis like 2008. That too is still unlikely.

Shares in Deutsche have crashed over the last year and fell to record lows last week, before recovering. That kind of gyrating price is typical of a market being driven by fear, rather than reason.

Deutsche’s British-born boss John Cryan was at pains to reassure his staff last week that the bank is not facing a crunch and many analysts agree that its fundamentals are far stronger than they were eight years ago. But banking crises can be driven by sentiment. Whatever the underlying finances, a dramatic loss in confidence can be catastrophic.

Which is why it would be irresponsible to declare Deutsche a new Lehman. But the fact that markets and experts reacted with such fear last week is evidence of how bankers, regulators and governments have failed to rebuild confidence since the 2008 banking blow-up.

We have had eight years to make improvements. Much good work has been done and indeed Britain’s banks are on a much sounder footing that they were. Capital reserves in our banks are far higher, although Europe’s banks have not gone anywhere near as far in building theirs.

But there is still an enormous degree of uncertainty about the risks banks pose. Even experts were unable to agree how risky Deutsche Bank’s business currently is. And Brexit will not keep us safe from a wider banking crisis. Shares in British banks were also given a rough ride last week on fears that the industry is still so interconnected a crisis in one bank will infect the others.

But what should also concern us equally is that we have not had anything like the strength of economic recovery we would need to cope with a fresh crisis should it ever arise.

Britain has fared better than many European states in this regard. But we have still had one of the slowest recoveries on record. Too many households still owe too much; business investment is still too low. And, critically, interest rates have remained at historic lows. Without those low rates the recovery would have been even slower, but it also means that central banks have very little ammunition left to cope if we faced anything like a 2008 crisis. Eight years on our markets and economy are still shell-shocked. Whatever progress has been made in reforming our banks, the fact that the Deutsche Bank situation can still spark such panic and uncertainty is stark evidence that more needs to happen before he scars will be properly healed.