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VeryMeanReversion

Future Bank Funding Plans

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The BoE SLS/CLG schemes are coming to an end and the Euro scheme of a similar magnitude (euro 450bn) is also coming to an end.

and from http://www.telegraph.co.uk/finance/newsbysector/epic/ftse100/7862235/FTSE-100-tumbles-to-new-low-for-the-year-as-double-dip-fears-hit-global-stock-markets.html

Royal Bank of Scotland strategist Andrew Roberts said he sensed a "Minsky moment" approaching - the point identified by economist Hyman Minsky when investors start to panic.

"We are seeing a snowball effect of negative news," he said. "It's all rather messy out there. In the last few days there has been a tangible shift from complacency to a realisation that maybe things aren't looking all that good.

"This is almost identical to two years ago – complacency giving way to the abundant risks out here."

Even bloomberg presenters last night were saying the bailouts were ineffectual and running out, leaving us with the same problems as before. This "story" is now getting around the main stream media. It really feels like the next phase is starting.

So my question is :

"what are the bankers going to do next?"

They need to come up with many hundreds of billions in the short-term and will be competing with the rest of the world for that wholesale money. This basically means net lending needs to go negative to the tune of £20-25bn a month for the next couple of years.

I can only see this being achieved by cutting new lending to an absolute minimum and calling in old loans that are in arrears. Is there any other choice? I don't see the BoE being so friendly this time around with credit schemes in the current environment.

The only way for banks to get that much money is to get their capital back rather than just the current gouging of consumers on interest rate spreads, that simply isn't fast enough. That can only be done by calling in mortgages i.e. all those in arrears.

Anyone else expecting a change in repossession policy coming soon?

VMR.

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when push comes to shove....

bailout

You are probably right.

The "if you are going to panic, panic early" rule might be applied by a bank or two before the next bailout is clarified which might be enough to help the housing market along its way though.

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Isn't there already what the BoE calls a "permanent successor" to the SLS, called the Discount Window Facility, brought in 18 months ago, which works in the same way as the SLS for up to a year at a time.

So, why are the banks making such a fuss about the SLS ending?

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More info from http://www.telegraph.co.uk/finance/comment/tracycorrigan/7862529/The-banking-system-still-looks-dangerously-shaky.html

"Britain's banks are better capitalised than most, having raised £127 billion of capital since the start of the crisis. However, they still need an estimated £1 trillion of fresh funding in order to meet the new capital requirements, once central bank support is withdrawn."

Repossess a couple of million average homes with an average loan of £150K and you can recover 30% of that trillion.

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  • 192 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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