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King Says U.k. Banks May Need More Capital To Finance Recovery

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http://www.bloomberg.com/apps/news?pid=206...id=aZNaIn.9PBJo

By Svenja O’Donnell and Jennifer Ryan

June 17 (Bloomberg) -- Bank of England Governor Mervyn King said Britains banking system may need to raise more capital to finance the economic recovery as officials keep printing money.

It may take further additions to equity capital before the banking system will be able to supply credit at a price and on a scale to finance a sustained recovery, King said in a speech at the Mansion House in London today. It is too soon to reverse the extraordinary policy stimulus that has been injected into the U.K. economy through monetary policy.

The Bank of England plans to spend 125 billion pounds ($204 billion) of new money on assets to kick-start economic growth, and Gordon Browns government has propped up some of the nations biggest banks with taxpayer funds. King, speaking alongside finance minister Alistair Darling, said both monetary and fiscal policy will have to change as the economy stabilizes.

When appropriate the Monetary Policy Committee will raise bank rate from the current 0.5 percent and gradually run down its portfolio of assets in a manner consistent with maintaining orderly markets, King said. It is also necessary to produce a clear plan to show how prospective deficits will be reduced during the next Parliament.

Dividing lines for the next election, which must be held within a year, sharpened this month. The opposition Conservatives have accused Brown of misleading voters after the prime minister denied most ministries face deep spending cuts. A mix of spending restraint and tax increases is inevitable, whichever party takes office, economists say.

Government Measures

The government has nationalized banks and invested billions of pounds in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. U.K. banks have already raised $158 billion in capital to shore up their balance sheets, Bloomberg data show.

While the current crisis still has some way to run and banks have more work to do in reducing leverage, investors have continued to perceive greater risk in the industry, King said.

Put bluntly, market data on credit spreads imply that some banks are viewed as a worse credit risk than some of their customers, he said. Companies that can bypass the banks to access capital markets directly are doing so.

Investors are demanding extra returns to hold bonds issued by banks. The spread between the yields of sterling-denominated bonds issued by financial companies and benchmark government debt averages 619 basis points, according to Merrill Lynch & Co. data. That compares to an average spread of 289 basis points for non-financial companies. A basis point is 0.01 percentage point.

Money Supply

King said there are tentative signs the central banks asset purchase program is starting to work as money supply is picking up. Policy makers this month reiterated their plan to keep buying government and corporate bonds.

While full economic recovery may be protracted, King said there are some signs that the British economy is beginning to stabilize, and financial markets have improved markedly.

King said new regulation on the banking sector should eliminate an implicit state guarantee for firms that combine household services with risky investment banking or funding strategies. He suggested banks which pose greater risks to taxpayers should face higher capital requirements or be prevented from offering services to consumers.

Any regulated bank should also be required to produce a plan for it to be wound down in the event of failure.

Making a will should be as much a part of good housekeeping for banks as it is for the rest of us, he said.

Edited by housesforcourses

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Last 2 lines:

Any regulated bank should also be required to produce a plan for it to be wound down in the event of failure.

“Making a will should be as much a part of good housekeeping for banks as it is for the rest of us,†he said.

WTF? :blink:

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He suggested banks which pose greater risks to taxpayers should face higher capital requirements or be prevented from offering services to consumers.

Woah, now that's one out of left field! How the ****** would they implement something like that?

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Woah, now that's one out of left field! How the ****** would they implement something like that?

What about charging everyone who uses internet banking an extra fee to create a fund to boost their capital requirements?

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Guest spp
More capital?

I have a capital F and a capital O that he can have.

Here you go...I'll donate two more F's.

F .. .. .. O F F

Edited by spp

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We’re being oiled up to accept a fresh Bank bailout soon, most likely a larger one.

Robert Pestons piece for the masses was on the main Govt controlled BBC news, something about strengthening the foundations of the banks to better aid the economy to recovery blah, blah, blah.

I’m also absolutely sure that should they feel any sort of dissent about it they’ll briefly allow a beam to crack, sending the masses into panic, supporting the bailout.

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We’re being oiled up to accept a fresh Bank bailout soon, most likely a larger one.

Robert Pestons piece for the masses was on the main Govt controlled BBC news, something about strengthening the foundations of the banks to better aid the economy to recovery blah, blah, blah.

I’m also absolutely sure that should they feel any sort of dissent about it they’ll briefly allow a beam to crack, sending the masses into panic, supporting the bailout.

So that will be bank bailout 3 then, apparently bigger and badder than bailout 1 and 2.

Been predicting that all year.

No wonder the govt hasn't got money to do anything else.

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That does seem to imply the banks are as good as dead???

A very strange statement to make.

Hardly strange. All the banks are insolvent. We know this. There isn't enough money in the world to deal with the problem.

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Here you go...I'll donate two more F's.

F .. .. .. O F F

Can I have a C please, Bob?

That Zombie Bank animation is great, LRYMS. The ropey rhyming of bank with stank makes sense in Scots, where stank = drain.

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We’re being oiled up to accept a fresh Bank bailout soon, most likely a larger one.

Indeed. It will have to happen before Christmas, as the Labour electioneers will not want the next bailout to be making headlines in the months running up to the election aka complete Labour rout.

Plus we can expect some kind of fabricated social crisis to divert our attention from Shylock.

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What's so special about banks? If you're printing money, why not give it to people to build rail infrastructure or install solar panels on every roof or better hospitals or just walk around town centres giving it away to homeless dossers? It sound crazy but it's even crazier to give it to bankers for less than worthless NINJA-loans gone toxic.

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We’re being oiled up to accept a fresh Bank bailout soon, most likely a larger one.

Robert Pestons piece for the masses was on the main Govt controlled BBC news, something about strengthening the foundations of the banks to better aid the economy to recovery blah, blah, blah.

I’m also absolutely sure that should they feel any sort of dissent about it they’ll briefly allow a beam to crack, sending the masses into panic, supporting the bailout.

That might be harder than they think this time round, yer ordinary Joe is just a tad more cynical after all the expenses stuff. Might have to be a big crack, push that too far and the roof falls in.

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So that will be bank bailout 3 then, apparently bigger and badder than bailout 1 and 2.

Been predicting that all year.

No wonder the govt hasn't got money to do anything else.

Yeah it looks like a 3rd bank bailout is inevitable, though am surprised they have waited so long. Mind it raises questions about the ol' printy printy. Is it not having the desired effect?

This could, of course deliver the fatal, nuclear blow to NuLabour, wiping them off the map for good. So maybe a little good would come out of the massive increase in tax we all will face someday.

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They need MORE MONEY!!!! THIS IS BRAND NEW INFORMATION!!!

/Sarcasm

We are being robbed before our very eyes. The banks are bankrupt. They have no money. They are ******ed.

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Yeah it looks like a 3rd bank bailout is inevitable, though am surprised they have waited so long. Mind it raises questions about the ol' printy printy. Is it not having the desired effect?

This could, of course deliver the fatal, nuclear blow to NuLabour, wiping them off the map for good. So maybe a little good would come out of the massive increase in tax we all will face someday.

I'm pretty sure there will be another bailout at the end of the summer/autumn. As in the last two years, things get much worse when banks have to report results at about that time, and people are all back from holiday.

I guess the government need to print lots now, so they can actually find the money for another bailout. Debt is wealth, lets not forget.

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