Thursday, Jun 11, 2009
We're all too big to fail now. Hurrah!
Telegraph: West Brom rescued in debt-for-equity swap
A deal, brokered by the Treasury, rescues the lender from administration – the route many had expected it to take following Dunfermline's collapse earlier this year. Its future was only made possible by the Treasury, which has created a new instrument for the sector that counts as core tier one capital, the key measure of financial strength.
Under the arrangement, the subordinated debt holders will swap their £182.5m of loans for an instrument that shares in the members' profits. As such, it will be the first time in society history that members will have to split their benefits with an outside investor.
Posted by devo @ 11:30 PM (476 views) Add Comment
3 Comments
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1. Albimac said...
It makes it all sound so positive. If this was such a great thing for them, why didn't they do it years ago?
2. sybil13 said...
A few weeks ago we heard:
"Six out of 10 building societies think they will have to raise their mortgage rates to cover the cost of compensating savers of failed banks, research showed today. The majority of building society chief executives said the levy they had to pay to the Financial Services Compensation Scheme (FSCS) would have a 'considerable impact' on their business.
Around 60% said they may have to raise their mortgage rates to offset the cost, while 53 per cent said their savings rates may have to fall."
Yesterday, I believe Nationwide did both, it raised mortgage rates and lowered savings rates. Now today we read about WB:
" for West Brom's 350,000 customers, it will mean less attractive mortgage and deposit rates under the "pricing benefit" the sector effectively pays as a dividend.The move, though, will make the society bomb-proof. The Financial Services Authority (FSA) has set a minimum core tier one ratio for societies of 7pc. Last year, West Brom's ratio was 10pc. After the conversion, it will rise to 12pc-13pc. The full details and the long-overdue accounts are expected on Friday. "
So much for low interest rates!
3. inbreda said...
100% would be a better option.