Wednesday, Mar 10, 2010
Stress-test this
Daily Mail: FSA sets out its nightmare scenario
Banks must be prepared for a double-dip recession and record unemployment, the country's financial watchdog has warned.
The Financial Services Authority revised its worst-case parameters for the stress-testing of banks to include a GDP decline of a further 2.4%, with unemployment rising to an all-time high of 13.3% and house prices falling 36% by the end of 2014.
The nightmare scenario is even worse than the regulator's gloomiest assessment at the depths of the recession last March.
Posted by little professor @ 11:27 PM (1976 views) Add Comment
13 Comments
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1. jack c said...
Last paragraph - "FSA chief executive Hector Sants (currently working his notice period) will give more detail in a speech on Friday, but Turner also said the watchdog was looking at banning self-certified mortgages (shutting the stable door a decade after the horse had bolted)"
Hardly surprising we have crisis after crisis with these Fu**wits in charge.
2. str 2007 said...
Hi Jack
Can you still get self cert mortgages then ?
And what rates are they putting those out at ?
3. doomwatch said...
I think 36% drop is a credible scenario. I would be interested to see the % confidence level (probability) the FSA
attach to this drop.
4. mark wadsworth said...
Typical Daily Fail. (or should that be Daily Hatemail?).
What bothers them most? A modest fall in GDP - it's not like we are a poor country. A huge rise in unemployment, which pretty much ruins your life. Or ... house prices reverting to their long term average?
5. taffee said...
what people don't realise is that unemployment is probably already way way over 10-12% if you include the people on certain benefits and disability
wages are actually falling and they keep saying average salery is £36,000,however,this is calculated in a strange way as the middle figure of 5 salary bands.....
all smoke and mirrors imo and DEFLATION is unavoidable...deflation of assets is the only likely scenario
6. estrader said...
@5 A US perspective of a sad situation put in a 'funny' way:
http://www.youtube.com/watch?v=Ulu3SCAmeBA
7. Bobrisk said...
There is no way that the average salary is £36K... maybe in the City
8. flashman said...
Obviously they have to give the article a dramatic title because they are in the entertainment business but they have also been good enough to provide enough information for anyone who cares to look beyond the punchy headline. The FSA would not have risked strengthening their theoretical worst case parameters if they though there was a serious risk that they would be breached. In the same article he warns about imposing liquidity rules that are too strict, too soon. Anyone who issues a warning of this nature is hardly going to impose new worst case parameters that he thought would be equally burdensome.
Hence:
“Turner said banks were likely to reveal more bad debts, but said there were unlikely to be any 'nasty surprises’ not already being factored-into the plans of lenders and the regulator itself”
and
”Lord Turner said he expected Britain to undergo a gradual V-shaped recovery”
9. Phil Yaboots said...
”Lord Turner said he expected Britain to undergo a gradual V-shaped recovery”
So, that would a \_____/ - shaped recovery, then?
10. wiltshire said...
Taffee, agree with you on the issue of unemployment. I would guess we are probably at record unemployment already if you take into account all the different places the government have found to hide 'unemployed' people.
From the Express last August - "The six-million figure is made up of 1.58million on Jobseeker’s Allowance, 2.6million on incapacity benefits and the new Employment and Support Allowance, 740,000 on lone parents’ benefits, 400,000 on carers’ benefits, 180,000 on income-related benefits, 360,000 on disability benefits and 95,000 on bereavement benefits."
From the Beeb's Politics Show in 2007 - "Unemployment in Wales is three and a half times higher than the official claimant count, according to a new report - what lays behind this alarming statistic? Researchers at Sheffield Hallam University found Wales has over 113,000 more unemployed people than Government figures reveal."
Then there's the under 18's who can't sign on, a lot of the over 55's are moved onto some allowance other than Jobseekers Allowance and you're also not allowed to sign on if living with someone earning above a certain level.
Basically, I believe the number of officially unemployed is an utterly discredited figure and shouldn't be considered as anywhere near accurate.
11. enuii said...
Wiltshire, you forgot all the students at 'uni'.
12. Askari said...
I think a further 10 to 15% drop in housing prices is a likely scenario this calender year. Property prices in the UK have been far too high in the last 49 years that I can remember during my residency in London. Self certification mortgages completely negates the fundamental compliance requirements that Her Majesty's Government expects the lenders to follow.
In my opinion the average salary is no more than £18,000, even after allowing the exceptional high salary scale in the City of London.
13. alan said...
For what its worth, I know quite a few people who don't have a regular income and a self cert mortgage. They are paying it off, nicely. It doesn't follow that everyone who took out a self cert is a cheat, speculator or will eventually default.