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Fsa Mulls More Data On Bank Bail-outs

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http://www.telegraph.co.uk/finance/newsbys...-bail-outs.html

The regulator is under growing pressure to disclose which UK banks were given a clean bill of health in the tests, which were conducted earlier this year to determine how well they could withstand certain negative economic conditions.

It refused to give any details to Bloomberg, the news agency, when it submitted a Freedom of Information request asking how UK banks had fared. However, officials are now believed to be in negotiations over releasing the tests' criteria without compromising commercial sensitivities. It is understood that the Treasury is reluctant to publish exact figures showing the degree to which individual banks passed or failed.

The tests were designed to see how much extra capital each bank needed and the amount of assets they ought to put into the Government's "asset protection" insurance scheme.

The results for UK banks have not been released despite the admission from the US government two weeks ago that similar tests showed 10 lenders needed to boost their reserves by a total of $74.6bn (£47bn). Barclays is the only bank to have been open about its test results. It is thought to have been asked questions such as what would happen if there was a 50pc fall in house prices or a recession lasting more than two years.

Sources close to one major UK bank subjected to stress testing suggested that the decision to withhold the information was "political rather than financial".

"The Treasury wasn't keen because the banks were tested according to the worst-case scenario," the source said. "Publishing the criteria shows how bad the Government thinks it is possible for the financial crisis to get."

Analysts last night said that failing to release the results would only make the market nervous about what the banks were hiding. "Keeping the information under wraps will only serve to create more uncertainty," said Vince Cable, the Liberal Democrats' treasury spokesman.

The UK has already pumped £1.4 trillion into strengthening the banking system through investments, asset insurance and underwriting loans.

"The transparency of companies over the last few months has significantly improved so it is ironic that the one body not joining in the transparency is the regulator itself," said Ian Gordon, an analyst at BNP Paribas.

Are they really fearing people will say the worst case scenario wasn't bad enough and we are currently heading to a far worse situation that wasn't stress tested for?

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"It is thought to have been asked questions such as what would happen if there was a 50pc fall in house prices"

:o Seems a lot of us here haven't been quite bearish enough. Why would you stress test 50pc falls unless there was a possibility of it happening?

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"It is thought to have been asked questions such as what would happen if there was a 50pc fall in house prices"

:o Seems a lot of us here haven't been quite bearish enough. Why would you stress test 50pc falls unless there was a possibility of it happening?

It needs 50% just to get to any sense of monetary reality.

That's if they haven't done permanent damage to the country, the companies working in it that are left and the people who have to participate in the economy.

I think they have done irreparable damage.

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http://www.telegraph.co.uk/finance/newsbys...-bail-outs.html

Are they really fearing people will say the worst case scenario wasn't bad enough and we are currently heading to a far worse situation that wasn't stress tested for?

God it IS quite worrying when the article says:

"The Treasury wasn't keen because the banks were tested according to the worst-case scenario," the source said. "Publishing the criteria shows how bad the Government thinks it is possible for the financial crisis to get."

Not worst- case scenario but "HOW BAD THE GOVERNMENT THINKS IT IS POSSSIBLE ".

Of course Moodys stress tested the 16 lenders it downgraded and said:

What’s different is the loss expectation is higher than it was three or four months ago looking at the economic forecasts on housing.

Last year we were looking at mortgage lenders and stress-testing a 25 per cent fall in house prices. In the past three or four months that assumption has changed to a 40 per cent fall, which is a considerable difference.

On Wednesday Adrian Coles, director-general of the Building Societies Association, said Moody’s had included an extreme stress test of a 60 per cent fall in house prices

I have been asking all week can the government provide enough cash to save banks / building socieities and fill the £200bn shortfall for mortgage lending?

the FSA is in the process of verifying whether all societies - not just the Moody's seven -( ? Moodys downgraded 16 lenders), have the capital to cope with further strains in the housing market and whether they have sufficient access to finance to withstand a prolonged drought of wholesale funding.

Societies unable to demonstrate they can absorb potential future losses comfortably will not be allowed by the FSA to retain their independence - unless the Treasury were to invest in them on taxpayers' behalf (not impossible).

As for those with adequate capital but inadequate access to deposits and wholesale finance, their future hinges on whether the Treasury and Bank of England relax their conditions for providing taxpayer loans and guarantees.

It doesn't look good when "Their future hinges", on being bailed out, so either way, if they can't absorb losses they need to be bailed out, and if they can absorb losses their future still depends on being bailed out!

Even with the money already given to the banks the BOE have said:

The Bank of England is concerned that the UK's banking system is heading for a third wave of crisis that could snuff out fragile signs of recovery in the economy.........

......Continued weakness at these banks may prevent the increase in lending that ministers are desperate to see, and dash hopes of a pre-election recovery for Labour.

The Bank of England is also worried that continued stresses in the global financial system will suck money out of the UK as cash-starved international banks bring money back home. Foreign banks are thought to be withdrawing funds from Britain once loans expire, rather than roll them over.....

The Government must consider pumping more cash into struggling British banks and conceivably nationalise more of them, or consign itself to years of insipid growth, the Bank of England Governor has warned

Mervyn King said although banks' survival had been assured by recent bail-outs, they would not start lending freely unless more capital was pumped into their balance sheets.

Mr King said: "There is a big difference in practice between the levels of capital banks need to be stabilised... and those required to persuade banks to exhibit normal levels of risk-aversion. How big that gap is is impossible to say... but it looks as if it will be quite big.

If the banks are going to continue as private sector entities they will naturally behave in a risk-averse way for a while... [The state] could put in more public sector capital but that has ramifications for the Governments' shareholdings in banks."

I just can't see where this is going when:

1. mortgage lending is already down nearly 2/3rds due to the RMBS market being closed and not likely to open for a long time and then not in the same way. IPPR were talking about restriction on RMBS funding

2. there are Q's about where the government is going to find the £220bn it already needs for this year.

3. The BOE says that despite ALL the money the banks have been given they can't afford to lend, or rather take the risk of lending on a falling property market.

4. The building societies now all need help just to keep their heads above water let alone money for lending.

Without funding, mortgage lending will dry up. “To the extent that funding is restricted, it will restrict our ability to lend,” Nationwide chief executive Graham Beale told the TSC. The BSA’s Adrian Coles reckons “it is quite conceivable that lending will fall this year” as funding evaporates. ......

.......With rates at almost zero, savers are moving their money into different investments and societies suffered overall

So where will the money come from?

We can't print enough can we?

Edited by Sybil13

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Where will the money come from?

We can't print enough can we?

The gig is up, keep on printing and the UK credit rating and currency go down the shitter, for good.

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"It is thought to have been asked questions such as what would happen if there was a 50pc fall in house prices"

:o Seems a lot of us here haven't been quite bearish enough. Why would you stress test 50pc falls unless there was a possibility of it happening?

Is that a quote about 50%? Where from?

The article says:

Publishing the criteria shows how bad the Government thinks it is possible for the financial crisis to get."

Moodys stress tested 60% :

What’s different is the loss expectation is higher than it was three or four months ago looking at the economic forecasts on housing.

Last year we were looking at mortgage lenders and stress-testing a 25 per cent fall in house prices. In the past three or four months that assumption has changed to a 40 per cent fall, which is a considerable difference.

On Wednesday Adrian Coles, director-general of the Building Societies Association, said Moody’s had included an extreme stress test of a 60 per cent fall in house prices

That is the same Adrian Coles who has spoken about "mortgage lending evaporating".

Edited by Sybil13

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It needs 50% just to get to any sense of monetary reality.

That's if they haven't done permanent damage to the country, the companies working in it that are left and the people who have to participate in the economy.

I think they have done irreparable damage.

In the article about the BOE official warning Darling "not to stop the housing crash" it said, property already down 21% was still 40% overvalued.

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I wonder if anyone has stress tested the Government's finances under a 50%-60% fall in house prices and a 16% fall in gdp from peak and what that would look like?

I DOUBT IT IT WOULD BE TOO STRESSFUL :o

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This just looks worse and worse.

Of course I want sensibly priced houses, but if it comes at a cost of economic decimation then is it a price worth paying?

Just a couple of weeks ago it looked like HPC was coming towards the Goldilocks scenario, a sort-of-recovering economy along with falling house prices. Now... :huh:

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http://www.telegraph.co.uk/finance/newsbys...-bail-outs.html

Are they really fearing people will say the worst case scenario wasn't bad enough and we are currently heading to a far worse situation that wasn't stress tested for?

"The Treasury wasn't keen because the banks were tested according to the worst-case scenario," the source said. "Publishing the criteria shows how bad the Government thinks it is possible for the financial crisis to get."

wasnt it only last year that the beautiful MP Caroline FLint "revealed" in a photo long shot that they thought the housing market could fall 10%? Oh how the bulls laughed at us for saying it was going to be worse......well, that was what the government thought......so whatever they think>the result will probably be 70% worse.

And they think its going to be worse....much worse.

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This just looks worse and worse.

Of course I want sensibly priced houses, but if it comes at a cost of economic decimation then is it a price worth paying?

Just a couple of weeks ago it looked like HPC was coming towards the Goldilocks scenario, a sort-of-recovering economy along with falling house prices. Now... :huh:

:blink::blink::blink:

can I also just add this for effect:

muwahahahahahahahahahahahahahahahahahah

:ph34r::ph34r:

Edited by grumpy-old-man-returns

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Read the article. 4th paragraph.

;) ooops of course ! Very tired been up at 5am two mornings in a row.....limited PC access ...excuses excuses!

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