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Royal Bank Of Scotland Chief Stephen Hester Sees Green Shoots

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The chief executive of Royal Bank of Scotland said yesterday that the global financial economy had “turned a corner†but that the full impact of losses from loans secured against property in the banking sector could take years to untangle.

In a speech to the property industry in London, Stephen Hester, the former chief executive of British Land who took over from Sir Fred Goodwin at RBS in October 2008, said: “The world has turned a very important corner and we have moved from an extraordinary case of fear of unprecedented financial meltdown to a conventional recession.â€

He attributed the change in outlook to government action but warned that early signs of recovery were insecure and would depend on a fall in demand for credit from borrowers. Mr Hester acknowledged that there were signs of green shoots, but said: “Sometimes the first green shoots suffer from frost and are the first to die.â€

He said that as long as there were higher levels of borrowing than saving, a recovery in the banking sector and the wider economy was not guaranteed.

“The banking system can support demand for credit but demand for credit should be falling. Borrowers have to save more and borrow less,†he said.

His remarks coincided with the disclosure that the number of repossessions on residential property will continue to rise for the next two years. Ian Shepherdson, chief economist at High Frequency Economics, a consultancy, said that 120,000 people could lose their home in 2011.

There are growing concerns that banks are over-exposed to potential losses from defaults on loans to commercial property companies.

Banks face losses of £100 billion from their exposure to UK commercial buildings such as offices and factories, according to Jones LangSalle, the consultancy, after steep falls in value.

In a separate address to the British Property Federation conference, Lord Myners, the City Minister, likened recent high levels of borrowing to a heavy night of drinking. He said: “I am teetotal, but if you have a heavy night’s drinking, it takes a long time to recover . . . We’ve had a seriously heavy night of drinking.â€

So we have a banker quite clearly stating they haven't got the money to lend to borrowers en mass hmmm anyone like to predict what a limited pool of funds will do to house prices.

Wait until people save more, or if there are a lot of borrowers allow them to borrow less money.

Yep house prices can only go up on this.

Better buy folks before it's too late, it's from the bankers mouth.

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i've heard it all now.........chief banker tells people to save more and borrow less.

That's not particularly on message with the 'get credit flowing to business and households' mantra as parrotted relentlessly by the tedious Darling.

i thought the whole point of recovery was for people to borrow [and ergo be lent] much much more than is currently happening.....

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