Where exactly did the ESRI say "the possibility of a banking collapse needs to be recognized" ?
I have had a look at the "executive summary" of this report and I think it's just some more panic inducing words from the media.
The ESRI report says
Apart from the decline in house-building, the other major issue overshadowing this Commentary is turbulence in financial markets. The impacts of the fall-out from difficulties in the US sub-prime lending market are being felt at the time of writing, with great uncertainty over who is the ultimate bearer of the risk associated with the sub-prime loans. While this uncertainty persists, a credit squeeze is in operation. This credit squeeze has led to central banks providing additional liquidity in the money markets, to the cutting of interest rates in the US and to particular difficulties for the UK bank, Northern Rock. Although we are conscious of these financial uncertainties, we do not factor them into our forecasts precisely because of their unknown impacts and duration."
This is hardly them saying that a "banking collapse cannot be ruled out" .
Is it?