Banking's not so risky then ?

[0007]

This appeared on BBC web tonight:

By Stephanie Flanders
Economics editor, BBC News

The Bank of England is poised to launch a new lending programme for UK banks in an effort to break the logjam in the credit market, the BBC has learned.

Final details are still being worked out including the scale of the plan and the exact terms.

But it will be similar to moves in the US, will be backed by the Treasury and could be launched as soon as next week.

The scheme would temporarily allow banks to swap their mortgage-based assets for government bonds.

The hope is that banks will find it easier to borrow and lend to other banks using these bonds as security, which in turn would ease up lending to individual borrowers.

The government does not consider this a bail-out of the banks and I've been told the scheme will not go ahead unless it can be designed to protect the taxpayer from any loss.

One safeguard will come from exchanging the mortgage-backed assets at less than their market value.

Banks are likely to welcome the plan, though it would need to be on a larger scale than previous efforts if it is to make a significant difference.

Story from BBC NEWS:
BBC NEWS | Business | Government plans to help UK banks

Some thoughts:

1. Bankers doing OK - why would they want to be careful in the future ?
2. Shareholders not being caned.
3. Stupid & irresponsible borrowers / lenders can rely on future availability of funds.
4. How long before the politicians resort to printing money ? - inflation is good for clearing debt.

 

[fibonelli]

My thoughts:
Moral Hazard;
AAA UK Government Debt potentially contaminated by this sh1t; and/or
Taxpayers potentially being royally $crewed

 

[chump]

I think by this time we had better accept that the scale of this issue is so far beyond orthodox solutions that new resolutions ,unpalatable or not ,are going to be a lesser evil than that which would be visited upon 'us' were the central banks simply to step aside and allow the market to resolve the issue. Were they to play laissez faire I suspect if you're not holding precious metals you could kiss your asre goodbye financially.

As it is I would not be surprised if this measure rather than being 'A' solution is simply going to buy time for other solutions eg recapitalisation to take place via future rights issues and certainly bond issues at costs well above current values for money. Bear in mind here in the UK we have only just begun the process of unwinding the misallocation of finance into property of all types and credit in general.
I think the BOE is right to get in right now with this before we get some really righteous momentum going with bank solvency ,BUT let's hope that this measure comes with some controls placed upon it that protect us the taxpayers from the kind of schoolground chaos that banks appear to create when left uncontrolled.

 

[chump]

I think by this time we had better accept that the scale of this issue is so far beyond orthodox solutions that new resolutions ,unpalatable or not ,are going to be a lesser evil than that which would be visited upon 'us' were the central banks simply to step aside and allow the market to resolve the issue. Were they to play laissez faire I suspect if you're not holding precious metals you could kiss your asre goodbye financially.

As it is I would not be surprised if this measure rather than being 'A' solution is simply going to buy time for other solutions eg recapitalisation to take place via future rights issues and certainly bond issues at costs well above current values for money. Bear in mind here in the UK we have only just begun the process of unwinding the misallocation of finance into property of all types and credit in general.
I think the BOE is right to get in right now with this before we get some really righteous momentum going with bank solvency ,BUT let's hope that this measure comes with some controls placed upon it that protect us the taxpayers from the kind of schoolground chaos that banks appear to create when left uncontrolled.

LOL....RBS first out of the stalls !

 

[TheBramble]

Doesn't have to be the tax-payers of course. RBoS this morning (UK) I understand are going to THEIR share-holders directly to ask for money. Uh? A bank asking it's customers for money...what an opportunity.....

 

[0007]

Doesn't have to be the tax-payers of course. RBoS this morning (UK) I understand are going to THEIR share-holders directly to ask for money. Uh? A bank asking it's customers for money...what an opportunity.....

It will be really interesting to see what the shareholders are (not ?) prepared to cough up. I'm trying to work out why, as a shareholder, I'd want to put in my own money when, if I sit back & wait Gordo will cave in & do it for me. Rights terms are gonna have to be pretty good - how will that help RBOS?

I can't help thinking Vince Cable would be a safer pair of hands at the Treasury - though Gods knows about the rest of his lot.

 

[chump]

It will be really interesting to see what the shareholders are (not ?) prepared to cough up. I'm trying to work out why, as a shareholder, I'd want to put in my own money when, if I sit back & wait Gordo will cave in & do it for me. Rights terms are gonna have to be pretty good - how will that help RBOS?

I can't help thinking Vince Cable would be a safer pair of hands at the Treasury - though Gods knows about the rest of his lot.

I don't think it's that simple ,or that 'easy'. The BOE approach will at the end of the day be a loan attached on paper and probably with safeguards as to ratio of loan to value. At any rate it will be at best a 'short term' solution to moneyflow needs. If we anticipate and god we'd be stupid not to that the value of that collateral will be under the cosh in the medium term then the balance sheet needs more than a short term solution.
To ensure the lenders can survive a loss of asset value they will need to stitch up a longer term patch to this issue. As you say though why would any shareholder want to do that at this point in time unless it was made ridiculously attractive.

In a more general sense , quite frankly I think 'we' in the UK better grasp something quite quickly. Our days of getting cheap money are probably gone. Look at it this way, I hold quite a bit of capital ,where am I going to put it. Into the UK markets/companies ,or into markets which are growing faster for well grounded fundamental reasons and that's in countries I might add that are actually doing a much better job of balancing their national accounts than the UK. The answer to me is I am happy to increasingly hold larger and larger proportions of my asset value in those markets than at any time in the past. So ,the only question is am I typical as an example of capital ownership ? ...LOL
Consequently ,in the race for 'money' globally what will the UK have to do to increase it's appeal as a destination for same ? Well the answer isn't lower returns on 'money' and that's for sure.

 

[chump]

Little parochial for you which might start you thinking a bit more clearly about whether the financial world is really going to disappear over a cliff.
I called an institution the other day to confirm if they had received my application for a particular bond as the funds for same were still languishing in an account. The bright young thing on the other end was very apologetic ,but explained that the delay was due to being completely overwhelmed by applications constituting some 20 bags of mail A DAY.
To help put this in perspective there's no shortage of real money ,BUT it is voting with it's feet as to what it is willing to be put into and what return it wants.Financial Doomsday ? I really don't think so .

 

[Nut]

This appeared on BBC web tonight:

By Stephanie Flanders
Economics editor, BBC News

The Bank of England is poised to launch a new lending programme for UK banks in an effort to break the logjam in the credit market, the BBC has learned.

Final details are still being worked out including the scale of the plan and the exact terms.

But it will be similar to moves in the US, will be backed by the Treasury and could be launched as soon as next week.

The scheme would temporarily allow banks to swap their mortgage-based assets for government bonds.

The hope is that banks will find it easier to borrow and lend to other banks using these bonds as security, which in turn would ease up lending to individual borrowers.

The government does not consider this a bail-out of the banks and I've been told the scheme will not go ahead unless it can be designed to protect the taxpayer from any loss.

One safeguard will come from exchanging the mortgage-backed assets at less than their market value.

Banks are likely to welcome the plan, though it would need to be on a larger scale than previous efforts if it is to make a significant difference.

Story from BBC NEWS:
BBC NEWS | Business | Government plans to help UK banks

Some thoughts:

1. Bankers doing OK - why would they want to be careful in the future ?
2. Shareholders not being caned.
3. Stupid & irresponsible borrowers / lenders can rely on future availability of funds.
4. How long before the politicians resort to printing money ? - inflation is good for clearing debt.

I think this is an incredible state of affairs, does this mean that anybody who has a difficult financial situation can pop along to the BOE for what is in effect cheap credit irrespective of credit their rating. It seems to me that the BOE is now joining in with the same game that got the banks into this position in the first place. The only reasons the banks are coming to us the tax payer is because it's a better deal than they can get from another bank.
Perhaps this why those on a low income now need to suffer increased taxation as the 10p tax rate is abolished. Come the election it will be interesting to see how the politicians will square this circle. I wonder how this tax increase will affect the risk analysts employed by the banks who have clearly failed miserably.
And what of the banks auditors/accountants/directors, is it not prudent accounting practice to make provision against bad debt and only take the provision to the bottom line when the debt is settled.

Blackadders Captain Darling knew more about warfare the the Governments Mr Darling knows about banking.


Nut

 

[SAINT]

The ironic thing about the RBS situation is that the money they are asking for equates to the price they (over) paid for ABN Amro at the market top.

 

[shadowninja]

Banking... it's as safe as houses.

Shouldn't laugh, though. Oh, what the hell...