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okaycuckoo

Wave Of Selling In 2012?

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Just read ST article on the asset protection agency - "Loan supremo who pulls the strings at RBS".

This guy basically runs an insurance scheme for the bank's dodgy securities. He was involved in the Scandinavian banks rescue in the '90s and seems to have a hardman reputation.

The piece gives the impression that he's pressing the bank to reduce estimates of value on alot of these loans and mortgages, including consumer credit and all residential housing stuff that's in negative equity.

The insurance gets triggered when losses exceed £60 billion - so far the losses are £37 billion with the target expected to be hit by 2012, although conveniently jiggering about with accounting methods means it should come in at £57 billion. Slightly confusing. He also says that he has no difficulty paying out on the insurance, even though that means RBS have to come clean on bigger losses, because the agency is there to provide financial stability. Part of the process is that RBS will have to mitigate its losses by selling some of the underlying assets, which means houses. He also complains about lack of disclosure by the bank, which could mean refusal of cover for some securities. The bank is not happy with him.

To wrap it up, one anonymous analyst said, "There is no way this insurance will be needed. No way, I tells ya". If that is the case, then the taxpayer makes £5 billion profit from the premiums paid by the bank.

Possible wave of selling in 2012?

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If you know you're definitely going to have to claim, then claim as much as possible, as soon as possible, and get the cash while you can.

If you go on saying you wont need it for too long, the government with withdraw the scheme.

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ST?

Pesto did a spot on this (APS) on Friday, don't know if it was posted.

His view is that it's unlikely they, RBS, will need it!

Apparently dependent on how RBS mark their assets / liabilities they show profit / loss against the APS.

Pesto states, "The amount insured under the contract has fallen from £231bn to £216bn, due largely to "maturities, amortisation and repayments" of loans (yes, some of RBS's troubled borrowers are paying their debts). " and then goes on, "More relevantly though. RBS expects to incur just £20bn of losses on some £37bn of loans covered by the scheme where the borrower has gone bankrupt or cannot repay for other reasons."

So RBS have reduced their liabilities by about 7% since the APS was provided.

More interestingly, although Pesto calls it relevant, is that RBS will only lose £20bn against £37bn expected from bankruptcies and this is good?

Wave of sellers in 2012 - I think it's already starting but not for RBS mortgagors but everyone, it's been 2 years since the props were put in place and many of the schemes only lasted that long. 2012 will just make it worse.

Oops, LINK for Pesto (if you're interested).

Edited by REP013

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ST?

Pesto did a spot on this (APS) on Friday, don't know if it was posted.

His view is that it's unlikely they, RBS, will need it!

Apparently dependent on how RBS mark their assets / liabilities they show profit / loss against the APS.

Pesto states, "The amount insured under the contract has fallen from £231bn to £216bn, due largely to "maturities, amortisation and repayments" of loans (yes, some of RBS's troubled borrowers are paying their debts). " and then goes on, "More relevantly though. RBS expects to incur just £20bn of losses on some £37bn of loans covered by the scheme where the borrower has gone bankrupt or cannot repay for other reasons."

So RBS have reduced their liabilities by about 7% since the APS was provided.

More interestingly, although Pesto calls it relevant, is that RBS will only lose £20bn against £37bn expected from bankruptcies and this is good?

Wave of sellers in 2012 - I think it's already starting but not for RBS mortgagors but everyone, it's been 2 years since the props were put in place and many of the schemes only lasted that long. 2012 will just make it worse.

Oops, LINK for Pesto (if you're interested).

Thanks for the link, Repo.

This is Pesto's interesting contrast to the ST article:

In the first quarter of 2010, RBS booked a £500m loss on the APS. But as conditions in credit markets deteriorated (a big hello to the eurozone and its woes) the value of the contract rose for RBS, so it booked a £500m profit.

The corollary, of course, of the rise in the value of the contract for RBS is that it represented a notional loss for taxpayers.

So the chancellor will be relieved that the public sector doesn't use mark-to-market accounting, so he doesn't have to declare this loss.

In fact as and when the APS contract is unwound, the chances are that the public sector - the taxpayer - will be sitting on a fat profit, based on data provided by RBS today.

The amount insured under the contract has fallen from £231bn to £216bn, due largely to "maturities, amortisation and repayments" of loans (yes, some of RBS's troubled borrowers are paying their debts).

More relevantly though. RBS expects to incur just £20bn of losses on some £37bn of loans covered by the scheme where the borrower has gone bankrupt or cannot repay for other reasons.

So for the taxpayer to incur any loss on this insurance contract, RBS would have to suffer more than £40bn of additional losses on the remaining insured loans and investments, which have a gross value of less than £200bn.

Now unless we tip back into severe recession, that looks unlikely to happen.

He's talking in the first place about the profit/loss on the contract itself, and then about RBS's OWN projections of gross losses. Sounds like he's been briefed.

In the ST, the guy who runs the insurance fund is talking about gross losses, and then raising doubts not just about the RBS projections, but also about the bank's ability to document the loans so as to clinch the insurance cover (on the last point I suspect he's talking mostly about consumer credit stuff, which is not necessarily related to mortgage securities).

I reckon the point about tipping back into severe recession is a circular argument: the tipping point depends on RBS and their cronies coming clean on the losses!

p.s. It looks to me that RBS (Natwest etc) customers are repaying their mortgages at much improved rates, and we should see some dip in repo orders for mortgages in the figures to be released by year end. But it's all fakery, in my opinion - the mortgages are still screwed.

Edited by okaycuckoo

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  • 245 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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