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moonriver

"u.k. Banks Face Credit Rating Cuts As Support Ends......

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http://www.bloomberg.com/apps/news?pid=new...id=a_FGXXoixUKc

By Jon Menon

Sept. 24 (Bloomberg) -- British banks may face “very notable†credit rating cuts once newly written “living wills†herald the end of government support for the system, according to Moody’s Investors Service.

Plans to introduce living wills, whereby banks are forced to simplify the corporate structure to allow an orderly break up should they get into difficulty, would remove the necessity for government support, said Moody’s in a report.

“Given that most ratings in the U.K. currently incorporate a very high degree of extraordinary support, the phasing out of this support could result in very notable rating downgrades unless banks have substantially strengthened their intrinsic credit profile by then,†said Moody’s. “The political willingness and financial flexibility to further support banks is limited.â€

Britain has provided 1.4 trillion pounds ($2.3 billion) of support to the banking system, funding lenders including Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. The introduction of living wills would confirm that the U.K. is a “low support country†where most banks receive limited support in normal times, said Moody’s.

The Banking Act, overhauled this year, provides the government with legal tools to deal with failing banks, said Moody’s. Living wills would reduce the systemic effect and complexity of bank failure, the report added.

Barclays Plc, the U.K.’s second-largest bank, will find it “very difficult†to write a living will because it is “severely complicated,†Finance Director Chris Lucas said at a conference on Sept.4.

The Financial Times reported the Moody’s comments earlier today. "

What does this mean?

Deos it look like another excuse to throw extra bailout money to the banks, because living wills are "severely complicated"? :unsure:

Or is it saying that government support may be ending because the banks are in such a mess, the government pot has run dry for them?

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http://www.bloomberg.com/apps/news?pid=new...id=a_FGXXoixUKc
Sept. 24 (Bloomberg) -- British banks may face “very notable†credit rating cuts once newly written “living wills†herald the end of government support for the system, according to Moody’s Investors Service.

Plans to introduce living wills, whereby banks are forced to simplify the corporate structure to allow an orderly break up should they get into difficulty, would remove the necessity for government support, said Moody’s in a report.

“Given that most ratings in the U.K. currently incorporate a very high degree of extraordinary support, the phasing out of this support could result in very notable rating downgrades unless banks have substantially strengthened their intrinsic credit profile by then,†said Moody’s. “The political willingness and financial flexibility to further support banks is limited.â€

What does this mean?

Deos it look like another excuse to throw extra bailout money to the banks, because living wills are "severely complicated"? :unsure:

Or is it saying that government support may be ending because the banks are in such a mess, the government pot has run dry for them?

"Intrinsic credit profiles" I assume this includes the whole Capital Ratios discussed at G20?

G20 Capital Ratios HPC Link

And I assume this also links with UK Lenders Need to Cut Lending by £500billion

.......Bank of England declared that UK banks might need to cut their lending by £500 billion within 4 years as the Governmental support will be withdrawn.

The report on financial stability published by the Bank on June 26th suggests that the widening financial gap of British lenders coupled with the reduction in the Bank of England’s assistance will mean that lenders will be obliged to look for additional sources of funding.

According to the central bank, some of the shortfall was met as the banks have sold their debt, which was backed by the governmental Credit Guarantee Scheme that amounted to £250 billion.The balance sheets of British banks have significantly grown in the past years; for instance, the balance sheet of the Royal Bank of Scotland Group has reached £2.4 trillion in 2008 – the figure exceeds the one of the UK economy as a whole.....At the moment, the UK Government possesses the major share of the RBS Group and 43% of the Lloyds Banking Group.

Analysts are determined that the Government’s plans on the increased banks’ lending towards the population are in controversy with its requirement to cut banks’ lending by £500 billion.

.....the Bank of England is confident that the measure is a must. In 2008, the difference between banks’ lending and deposits was constantly growing and reached as much as £800 billion with almost 50% of the amount being backed by residential property securities.

Probably why Rightmove's Latest HPI said it would take 10 years to rebuild the banking system if we are lucky, meanwhile mortgage lending will continue to be severely restricted :

...too few buyers can put down the 40% deposits that are needed in order to secure the best mortgage deals. Finance greases the wheels of the property market, and it is anybody’s guess when we might see the necessary level of competitive funding return. Frustrated homehunters should note the expected ten year timetable to wind up Lehman Brothers, giving a clear indication of the time required to rebuild the banking system

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Bank of England declared that UK banks might need to cut their lending by £500 billion within 4 years as the Governmental support will be withdrawn.

So how does that tie with Banks need to lend more to hardworking families ?

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Goverment support will continue. It's a nothing story.

Gordon said so.

Gordon Sez...no more boom and bust.

S'eazy innit.

Boomy boomy then printy, printy.

No one will notice. No one will care. Everything will be fine.

Right?

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Bank of England declared that UK banks might need to cut their lending by £500 billion within 4 years as the Governmental support will be withdrawn.

So how does that tie with Banks need to lend more to hardworking families ?

£500bn!? Blimey, that's about 40% of total UK mortgage debt... :ph34r:

EDIT: http://www.mortgagestrategy.co.uk/cgi-bin/...h=401&f=402

Total secured lending on homes at the end of November 2007 stood at £1.2trillion.
Edited by Traktion

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Bank of England declared that UK banks might need to cut their lending by £500 billion within 4 years as the Governmental support will be withdrawn.

So how does that tie with Banks need to lend more to hardworking families ?

Doublethink.

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£500bn!? Blimey, that's about 40% of total UK mortgage debt... :ph34r:

EDIT: http://www.mortgagestrategy.co.uk/cgi-bin/...h=401&f=402

Makes you wonder if Moodys got it right when they said back in April 2009 that they :

.....had changed its assumptions about UK house prices in the past few months.

Marjan Riggi of Moody’s 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.â€

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......

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Makes you wonder if Moodys got it right when they said back in April 2009 that they :

“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.â€

Hhhmmm, yes, it does make you wonder, because with these sort of cuts in lending, it looks like mortgage borrowing, is about to get a whole lot harder than it is now.

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Bank of England declared that UK banks might need to cut their lending by £500 billion within 4 years as the Governmental support will be withdrawn.

So how does that tie with Banks need to lend more to hardworking families ?

brown, blanchflower, king - inspiration for a trendy bar name The Three Clowns,

and soon all to throw toys at each other and blame each other in fits of rage,

what a hopeless bunch, they make laurel & hardy plots look like latin classes by comparison.

anyone of that age who calls themselves danny has got to be a wally, sorry, its like elderly mums insisting on wearing jeans and listening to Blue or something, always rings alarm bells

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Makes you wonder if Moodys got it right when they said back in April 2009 that they :

Stress tests are meaningless when you mark to model.

course, behind the scenes, they know different....they know its time to bonus and retire.

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Clearly zero interest rates printing money deficit spending is designed to stoke inflation and prop up houseprices which underpins the banks assets regarding home loans.

Clearly the risk is loss of confidence in stearling and repeating the last mistake a housing bubble which is now happening.

The US is talking about easing down support and I assume we may be easing down things maybe less printing and increasing VAT and stampduty etc, For me this is very correct actions the stock market and houseprices may go down a bit and the banks wont be as strong but less risk of currency devaluations.

Pain now or massive problems if things carry on as they are.

The government would be smart to ease off now for me.

I dont trust the powers that be so actions are what I watch for and not words but if they do reduce support and banks reduce lending I expect lower house prices or a leveling off but a general election is soon and with high unemployment and falling houseprices wont help Labour this conflict of interest the countrys needs and Labours desire to win the next election I expect a too loose fiscal policy to continue until April 2010 regardles of what is stated.

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