Tuesday, Jan 13, 2009
The Real Tourniquet: Capital Adequacy and the Mark-to-Market Rule
RBN News: CREDIT WHERE CREDIT IS DUE: THE DIRECT WAY TO FIX THE CREDIT CRISIS
Dear Sirs, In light of recent developments, when you returned my check marked “insufficient funds,” were you referring to my funds or yours?
What actually constrains bank lending is the capital adequacy requirement, something that is imposed not by our own central bank but by the Bank for International Settlements (BIS). Called “the central bankers’ central bank,” the BIS pulls the strings of the private international banking system from Basel, Switzerland.
a far more important source of the decline in required reserves has been the growth of sweep accounts. In the most common form of sweeping, funds in bank customers’ retail checking accounts are shifted overnight into savings accounts exempt from reserve requirements and then returned to customers’ checking accounts the day.
1 Comment
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1. davecrash said...
Worth a read that, even though it was mainly about the USA.
I quite liked her idea of using local and public banks, something I like, as I hate globalisation in general. All globalisation has achieved is move jobs to places where they can be done more cheaply in order to increase bonuses for those at the top, the customer has never benefited one jot. I always find it funny how all the UK/USA PLC boards of directors manage to identify that call centers and making stuff can be done more cheaply in India or China to increase their bonuses and increase profits to shareholders. However they all failed to realise that moving their own jobs by say having an India or Chinese board of directors would also be further increase profits for shareholders, funny that.
Anyway, a couple of weeks ago a few people on here where talking about taking their money out of the bank in cash to teach the greedy UK bankers a lesson. I think this is a wonderful idea, I am all for it in theory, but you just know some poor sod will end up leaving their entire life savings on the bus or train, get robbed or their house will burn down. My idea is to forget about the interest rate you will get and move your hard earned savings to your local building society and leave it there. Your local building society will,
1. Never have been lending 125% LTV mortgages to feckless borrowers. Probably 85% max.
2. Messing around in money markets, derivatives, credit default swap or any other such nonsense.
3. Only have been lending money from their deposits.
4. Have pens on the end of the chains in their branches.
5. And best of all, they won't be trying to sell you a crappy pension, a crappy PPI policy or a crappy identify theft policy when all you were trying to do was pay in a cheque or get a balance.