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Bank Of England Boss Mark Carney To 'stress Test' Banks To Find If They Could Cope With A House Price Crash

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http://www.thisismoney.co.uk/money/markets/article-2554735/Fears-house-price-bubble-stresses-Bank-boss-Mark-Carney.html

Bank of England boss Mark Carney to 'stress test' banks to find if they could cope with a house price crash

Fears of bubble hinge on lenders' ability to withstand sudden price fall

By Alex Hawkes, Financial Mail On Sunday

PUBLISHED: 22:03, 8 February 2014 | UPDATED: 12:11, 9 February 2014

The Bank of England is to test whether banks and building societies would go bust if house prices crash.

A ‘stress test’ will examine whether banks will need bailing out if prices plunge. It is being drawn up by the Bank’s Financial Policy Committee, whose members include Governor Mark Carney.

A Nationwide Building Society survey just out showed house prices had risen by 8.8 per cent in January over the same month last year.

The high-profile examination by the Bank could highlight the gulf between Carney and Chancellor George Osborne over the housing market. Bank officials are keen to use whatever tools they can to prevent a price bubble, with Carney drawing attention last year to the relatively small number of new homes built.

Osborne’s Help to Buy scheme offering Government-backed mortgages has been blamed by some for helping to inflate the market.

The Bank will conduct stress tests on eight banks and building societies. It has to do tests on the ‘Big Four’ banks – HSBC, Lloyds Banking Group, RBS and Barclays – for the European Banking Authority, which is testing on all EU banks.

As part of the analysis, it plans to adjust the European test to include a UK housing crash, and will also test the next four largest UK financial institutions – Standard Chartered, Nationwide, Santander and The Co-operative Bank. The results could be published by November, but the FPC has not yet decided if it will make them public.

Top bank chief executives and regulators have in recent months tried to play down fears of a UK housing bubble.

Carney said last year that the Bank would stop encouraging home loans through the Funding for Lending scheme, saying that it was ‘no longer appropriate or necessary for us to have our foot on the accelerator, better to shift into neutral.’

But he told MPs last month: ‘Any time we see a sharp increase in credit growth we take an interest. We do have to put in some context though, that it is still below historic averages.’

Santander UK chief executive Ana Botin told The Mail on Sunday that while houses in some parts of London were now ‘expensive’, mortgages remained affordable.

‘We look at how much of people’s income is going on their mortgage. It is now about 17 to 18 per cent. If it gets to 30 per cent we would worry.’

Some good comments on the website...

Edited by AvidFan

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I'll save them the time and the money.

NO.

However, why should we, the people. be forced to bail out the bankers by [paying sky high house prices.

Regulate them, shut them down, prosecute.

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I joined this site in 2006 and it's the first time I can recall an official government body mentioning a house price crash.

What could it possibly mean?

:lol:

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I joined this site in 2006 and it's the first time I can recall an official government body mentioning a house price crash.

What could it possibly mean?

:lol:

To be honest it soons like more reverse psychology.

Can the banks survive if we have a bubble.

Hence, we have no current bubble, therefore prices will be shooting up. Buy now before you miss out. rolleyes.gif

"A ‘stress test’ will examine whether banks will need bailing out if prices plunge. "

They are already being bailed out !!!!!

Edited by TheCountOfNowhere

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How bizarre. Firstly to mention it, and secondly to think that any stress test that is made is worth anything?

Are we looking at misaligned central communication from the politburo or actual softening up?

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I joined this site in 2006 and it's the first time I can recall an official government body mentioning a house price crash.

What could it possibly mean?

:lol:

Come, come. Just last week George Osborne said (talking about the housing shortage and the prospects for prices over the next few years)

We are recovering from a property crash. Am I someone who says we should be vigilant about this? Absolutely we should be vigilant ...

http://www.theguardian.com/society/2014/feb/04/housing-crisis-george-osborne

Mind you, no-one seems to have mentioned this crash when it was actually happening. Must have been some kind of stealth crash.

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To be honest it soons like more reverse psychology.

Can the banks survive if we have a bubble.

Hence, we have no current bubble, therefore prices will be shooting up. Buy now before you miss out. rolleyes.gif

"A 'stress test' will examine whether banks will need bailing out if prices plunge. "

They are already being bailed out !!!!!

More than that. It's a continuous subsidy, bailout and profiteering opportunity rolled into one.

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Fess up who wrote this:

"Come on let's have another bubble together with rampant inflation. What we see now is the tail end of the Brown/Balls bubble, an artificial economy based on unsustainable debt and robbing private sectior pensions to fund an artificial economy with artificial jobs and feel good factor they wanted to create. Now this unelected sham of a divided infighting coalition government, who didn't reverse the pensions robbery, is using the tax payer to back mortgages to those who can't afford them. What a farce. So, let's have rampant inflation, and in a few years time our mortgages will be insignificant compared to our salaries, that will resolve our problems"

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More bailouts, more thievery, less capitalism. :angry:

Unbelievable that statements about needing more bailouts are these days just shrugged off as part of lifes rich tapestry, rather than provoking riots.

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I think everything will be found to be OK and the Bankrupt of England will have been 'vigilant.' I can feel it in my bones.

You honestly think they will produce a report stating the banks couldn't withstand a stress test, especially in a Bankocracy?

Edited by aSecureTenant

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TBH I think it would be wise to stress test the banks before putting up rates. Any body here be prepared to stick up rates and then have egg all other your face?

Edited by gf3

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Stress tests! Seriously? And these administered by the demented bag lady of threadneedle street ..

TAE: A Third Dimension In Fraud

http://www.theautomaticearth.com/debt-rattle-feb-8-2014-a-third-dimension-in-fraud/

The scope of fraud, corruption and manipulation, as carried out throughout the financial industry in the past decade (and beyond), is not only deepening and widening as details become available. A third dimension is also coming to the forefront: the active contribution of regulators like the Bank of England (and undoubtedly other central banks, since, as Tyler Durden says: “there is never just one cockroach”) in enabling fraud in currency markets.

watch?v=o2kO_5cNF5k

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He's worried that raising rates might cause banks to go bust via a property crash.

QED, they're admitting they've inflated the property market to bail out the banks and is now hoping they won't still go bankrupt...i.e. that in the intervening 5 years of 'emergency rates' they've managed to pass on a large portion of the bag to other people - those who have bought at lower LTV's, property 'investors' and foreign cash purchasers and of course...the government with its guarantees, i.e. us.

The largest debtor is the UK government - we own much more than QE 325bn bonds which we pay the interest on ourselves...if interest rates on 10Y treasuries go up we're finished. Since the government control the figure they won't destroy themselves. Although, markets have a habit of taking matters into their own hands...same with the US. No one can raise interest rates its a stale mate but if the markets stop demanding US/UK debt as a save haven from volatility - ie they find somewhere else to go...then there will be trouble. Historically the smart money goes to tangibles like real estate/antiques though...

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Guest spp

Just a test to see how much of a bubble they can create before they need to pump more currency into the banks? or how much cash they can confiscate for bail-ins? Bubble bonds?

The system always needs more DEBT!

Edited by spp

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and have they stress tested a food and oil crunch?.....the interest rate rise will come as a consequence of that, partially.(

but yes there are a small clique of people trying to not just ride the rollercoaster, but stand up in the cabs and try to throw it from side to side for a bigger buzz)

when this stuff with syria kicks off(and saudi arabia/jordan/yemen/qatar etc) just how easy is it going to be to transport food?

bye bye globalism.

zbignew brzinski may be a thoroughly nasty piece of work, but I think he assessed this one correctly.

..there is potentially a situation brewing in that neck of the woods that could easily quadruple the price of fossil fuels(if other sources have not been found).

basically 1973 on steroids.

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To be honest it soons like more reverse psychology.

Can the banks survive if we have a bubble.

Hence, we have no current bubble, therefore prices will be shooting up. Buy now before you miss out. rolleyes.gif

"A ‘stress test’ will examine whether banks will need bailing out if prices plunge. "

They are already being bailed out !!!!!

actually stress test needs look more like historical instrospection.

ie why did the french revolution really happen?

yes there were "exacerbators" in the situation trying to inflame it.

...but you also have the monopolists like duc de orleans who were quite frankly creaming it it without any respect for the serfs.

when the elastic band gets stretched just that bit too tight........

stingy fingers time.

(actually to put it bluntly that bit is in the bible too...and it does not end at all well for those playing "masters and servants")

.they would be wise to pay heed.

Edited by oracle

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They are walking a tightrope

The deficit has proved much more difficult to eradicate than they expected.

After all why put rates up when inflation is so low?

No, government debt will at some point become unpalatable and shtf

What would trigger an hpc, higher supply, hmm not today any way.

Unemployment and panic, maybe.

What about the IMF and proper savage cuts?

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Won't this just be an excuse for more printy printy?

If a bank fails they will have to raise more capital to plug the gap.

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