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Uk Banks Told To Boost Funds By £130Bn

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http://www.telegraph.co.uk/finance/financetopics/g20-summit/7858001/G20-summit-UK-banks-told-to-boost-funds-by-130bn.html

The heads of state and finance ministers at the Toronto G20 summit agreed that in future banks should keep enough capital on their balance sheet to have withstood the aftermath of Lehman Brothers' collapse in 2008. The ruling, endorsed by the Chancellor, George Osborne, is likely to have profound consequences for banks both in the UK and overseas.

Whereas under the previous international banking accords, Basel I and II, banks were obliged to hold only 8pc of safe capital - largely comprised of equity - on their books to provide a buffer against insolvency, the new rules sketched out at the Canadian summit threaten to go some way further. Capital requirements act as an effective speed-limit for banks, with higher requirements preventing them from making bigger profits.

The G20's final communiqué said: "The amount of capital will be significantly higher, and the quality of capital significantly improved, when the new rules are fully implemented. This will enable banks to withstand, without government support, stresses of the magnitude associated with the recent financial crisis."

Since the start of the crisis, British banks have had to bolster their balance sheets by £127bn, with around half of this coming from taxpayer cash infusions, according to Bank of England figures from the turn of the year.

Since then, banks have raised a further £15bn from the open markets as they seek to improve their financial health. The Toronto agreement implies that this balance sheet rebuilding - and effective fall in bank profitability - will be permanent rather than an aberration.

The consequences for the financial system and wider economy are likely to be far-reaching, with banks remaining reluctant to lend as they funnel cash towards strengthening their balance sheets.

Peter Sands, chief executive of Standard Chartered bank, warned in The Sunday Telegraph yesterday: "We should recognise that increasing capital levels has a real cost as it makes credit both more expensive and less available. Every extra dollar a bank holds in capital equates to at least $15 that it is unable to lend."

However, countries will be allowed time to implement the rules, so the rush to re-capitalise does not trigger a further plunge in economic activity.

For an economy based entirely on the growth of debt to expand this is going to cause a problem.

What effect will the banks having to retain capital have on the GDP figures?

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The solution seems so simple I hesitate to even mention it.

We print this money.

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http://www.telegraph.co.uk/finance/financetopics/g20-summit/7858001/G20-summit-UK-banks-told-to-boost-funds-by-130bn.html

For an economy based entirely on the growth of debt to expand this is going to cause a problem.

What effect will the banks having to retain capital have on the GDP figures?

I suppose the restult for high street retail/commercial bansk could be that they become a little more like utilities.... only small levels of growt being delivered, sinking vast sums into infrastructure ( in their language capital cushions) and delivering a decent yield though with uninspring growth... might actually be where they should be... solid, uninspiring, reliable.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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