Bank of England says banks' demand for cheap finance doubles in last week

[TheCountOfNowhere]

What's going on here then ?:

 

http://uk.reuters.com/article/uk-britain-boe-bank-lending-idUKKBN14B1V1?il=0

 

" British lenders' usage of a new Bank of England scheme which helps them pass on August's interest rate cut more than doubled over the past week, figures from the central bank showed on Thursday. "

 

Double in a week ?

WTF !!!!!!

 

[Mapatasy]

Christmas bonuses?

[TheCountOfNowhere]

They magic up money out of nowhere and "lend" it to a bank to "lend" to someone at 1% IRs...but only for houses you understand.

 

Forcing down savings rates in the process.

 

How the f**k are they getting away with this madness

[ingermany]

Funding for Spending.

Got to keep GDP figures inflated. Otherwise that Brexit vote might look foolish. 

[TheCountOfNowhere]

Just now, ingermany said:

Funding for Spending.

Got to keep GDP figures inflated. Otherwise that Brexit vote might look foolish. 

Spending,...no.....buying houses and keeping the rich mens asset prices up....YES

[Errol]

This looks like a clear sign of a healthy economy to me.

Edited December 22, 2016 by Errol

[TheCountOfNowhere]

[ingermany]

3 minutes ago, TheCountOfNowhere said:

Spending,...no.....buying houses and keeping the rich mens asset prices up....YES

It's government underwriting a pyramid scam.  It cant work without state aid. They can't stop even if they want to. If they do then trillions in  "wealth" will just disappear into thin air. 

[TheCountOfNowhere]

Just now, ingermany said:

It's government underwriting a pyramid scam.  It cant work without state aid. They can't stop even if they want to. If they do then trillions in  "wealth" will just disappear into thin air. 

It cant work with state aid either !!!!!!!

Continuing with this insanity is criminal,  The government shopuld have spend the last decade dismantling this mad house, instead they've build it up bigger and bigger.

 

Holy **** they just wont stop/

[TheCountOfNowhere]

Could this have anything to do with what's happening in Italy ?

[Fully Detached]

I'm pretty sure there's a rational explanation for this. The alternative is to believe that the banks have loaned more in the week before Christmas than they have in the entire three month period leading up to it. Doesn't sound overly likely to me.

Does make me wonder if they're just filling their stockings with liquidity to be on the safe side, while everybody is busy looking the other way. Maybe they're thinking they can worry about actually lending it out some other time.

[GreenDevil]

The banks are prolly securing the funding for next period. They buy big swaps at fixed rates, whi ch they then sell on as mortgages to the mugs.

Edited December 22, 2016 by GreenDevil

[TheCountOfNowhere]

30 minutes ago, Fully Detached said:

I'm pretty sure there's a rational explanation for this. The alternative is to believe that the banks have loaned more in the week before Christmas than they have in the entire three month period leading up to it. Doesn't sound overly likely to me.

Does make me wonder if they're just filling their stockings with liquidity to be on the safe side, while everybody is busy looking the other way. Maybe they're thinking they can worry about actually lending it out some other time.

It did sounds odd to me....this is the least likely time they would need to lend it to idiot borrowers.

Maybe they know what's coming or one of the subsiduaries are getting ready to go out and buy properties in person after Christmas.

Either way it's a slap in the face for savers/workers and anyone who isnt ponzied up.

[Democorruptcy]

2 hours ago, TheCountOfNowhere said:

Double in a week ?

WTF !!!!!!

 

US raised their interest rate last week? Future finance could be more expensive? 

[Fully Detached]

46 minutes ago, TheCountOfNowhere said:

It did sounds odd to me....this is the least likely time they would need to lend it to idiot borrowers.

Maybe they know what's coming or one of the subsiduaries are getting ready to go out and buy properties in person after Christmas.

Either way it's a slap in the face for savers/workers and anyone who isnt ponzied up.

Only if it actually does end in an orgy of credit bukkake. If they're just securing the dosh at an opportune moment with the intention of continuing lending at current pace, then it's not really a problem, I suppose. My question would be why is now an opportune moment?

13 minutes ago, Democorruptcy said:

US raised their interest rate last week? Future finance could be more expensive? 

And that seems like as good a reason as any. Which means that once this lot has gone, things might start to get a little more interesting?

[TheCountOfNowhere]

14 minutes ago, Fully Detached said:

Only if it actually does end in an orgy of credit bukkake. If they're just securing the dosh at an opportune moment with the intention of continuing lending at current pace, then it's not really a problem, I suppose. My question would be why is now an opportune moment?

And that seems like as good a reason as any. Which means that once this lot has gone, things might start to get a little more interesting?

Was interesting this morning that the MPs are now looking at the BoEs policies.

Me thinks they know what the problems are and what the solution is, William Hague has already informed them.

http://www.telegraph.co.uk/news/2016/10/17/central-bankers-have-collectively-lost-the-plot-they-must-raise/

I think when I saw that I knew what was coming next.

 

The British establishment are masters at self preservation.  

How do you think they will fair if the bankers rob the people any more ?

One can only hope the queen is about to have a word with the money printing man

Edited December 22, 2016 by TheCountOfNowhere

[Fully Detached]

23 minutes ago, TheCountOfNowhere said:

Was interesting this morning that the MPs are now looking at the BoEs policies.

Me thinks they know what the problems are and what the solution is, William Hague has already informed them.

http://www.telegraph.co.uk/news/2016/10/17/central-bankers-have-collectively-lost-the-plot-they-must-raise/

I think when I saw that I knew what was coming next.

 

The British establishment are masters at self preservation.  

How do you think they will fair if the bankers rob the people any more ?

One can only hope the queen is about to have a word with the money printing man

You know, in all honesty, I've just completely given up trying to predict anything any more, so I try not to read anything into what MPs and the BoE are up to. The whole thing has been so utterly batshit crazy for so long that it seems pointless trying to apply any sort of logic to it; I've taken to just enjoying the ride and my little enforced tour through Wonderland. 

[Wayward]

18 hours ago, Fully Detached said:

You know, in all honesty, I've just completely given up trying to predict anything any more, so I try not to read anything into what MPs and the BoE are up to. The whole thing has been so utterly batshit crazy for so long that it seems pointless trying to apply any sort of logic to it; I've taken to just enjoying the ride and my little enforced tour through Wonderland. 

pretty safe to predict that the outcome of their policies will be to shift wealth into the hands of the rich.  I am not enjoying the ride...I want to get off!

[Fully Detached]

1 hour ago, Wayward said:

pretty safe to predict that the outcome of their policies will be to shift wealth into the hands of the rich.  I am not enjoying the ride...I want to get off!

Yep, by "enjoying" what I actually mean is that I'm being fascinated by the lunacy, which is quite a ride in and of itself.

[Ah-so]

22 hours ago, Fully Detached said:

I'm pretty sure there's a rational explanation for this. The alternative is to believe that the banks have loaned more in the week before Christmas than they have in the entire three month period leading up to it. Doesn't sound overly likely to me.

Does make me wonder if they're just filling their stockings with liquidity to be on the safe side, while everybody is busy looking the other way. Maybe they're thinking they can worry about actually lending it out some other time.

Definitely on the right lines. I think that they are building up cheap term funding before the year end accounts finalise. This will give them a good term funding profile, improving their NSFR percentage and its cheapness will help support banking margins. 

[LiveinHope]

12 minutes ago, Ah-so said:

Definitely on the right lines. I think that they are building up cheap term funding before the year end accounts finalise. This will give them a good term funding profile, improving their NSFR percentage and its cheapness will help support banking margins. 

Given that I received a letter last week saying that my interest rate was dropping from 0.75 to 0.65 from January 16th, I think they have just filled their boots with money from a source that is a cheaper than from savers, whom they don't really need to retain any more.

With my cynical hat on, I wonder if perhaps an intended consequence of the cheap money is to drive savers to pour their money into bricks and mortar and then, when all the money is in paying off some of the debt, collapse the market.

Edited December 23, 2016 by LiveinHope

[zugzwang]

3 hours ago, Ah-so said:

Definitely on the right lines. I think that they are building up cheap term funding before the year end accounts finalise. This will give them a good term funding profile, improving their NSFR percentage and its cheapness will help support banking margins. 

Doesn't the Term Funding Scheme now make the NSFR ratio, and hence Basel III, largely redundant?

https://www.fundstrategy.co.uk/major-break-history-term-funding-scheme-carneys-radical-tool/

Quote

The Term Funding Scheme could be the most critical element in the Bank of England’s £170bn response to Brexit, acting as a transmission mechanism to ensure a 0.25 per cent rate cut and a £60bn increase to QE boost the real economy.

The Bank of England voted unanimously to implement the Term Funding Scheme, which could total £100bn, and in a statement noted it would be difficult for many banks and building societies to reduce deposit rates much further, which could limit their ability to cut their lending rates.

“In order to mitigate this, the MPC is launching a Term Funding Scheme that will provide funding for banks at interest rates close to Bank Rate,” the central bank said in a statement.

It will let banks borrow at the bank rate of 0.25 per cent, but the cost of the scheme will rise for every percentage point that the bank’s lending falls. “Banks would be able to access another pound of funding for every pound their net lending expanded,” the MPC said in its minutes.

It said this would “reinforce the transmission of the reduction in Bank Rate to the real economy” so that the hoped for benefit of monetary stimulus would be passed on to households and firms.

 

The mechanism, which replaces the Funding for Lending Scheme, has drawn comparisons to the ECB’s Targeted Long-Term Refinancing Operations. Unlike the Funding for Lending Scheme it is funded by newly created central bank money.

“It is definitely designed to be good news for banks, customers and clients,” says Russ Mould, investment director at AJ Bell. “There should be some very cheap financing. It’s going to be cheaper than what you get in the wholesale market, it’s going to be cheaper than what you get in the bond market.”

“People have been worried about margin compression, they’ve been worried about the yield curve flattening. The Bank of England is trying to mitigate some of these challenges by making cheap financing available and letting banks lend on a less risky basis than they would otherwise.”

Bank stocks were up at the end of the day with Barclays up 1.2 per cent and HSBC up 2.3 per cent.

“Long run we’re going to have to see who takes the money up and how much, and then what momentum that provides in terms of credit growth in the UK,” Mould says.

Mould says without the TFS banks have good reason to hoard cheap capital. These include boosting the Tier 1 capital ratios required by regulators, struggling to find creditworthy borrowers, and keeping profits stable as the net interest margin – the gap between interest rates on deposits versus loans – falls.

Eric Lonergan, macro investment fund manager at M&G Investments, says: “Carney has very cleverly made some conventional headline changes, while disguising a potentially radical new tool.”

“The cut in base rates and the new QE programme are a sideshow. The new Term Funding Scheme is extremely important,” says Lonergan. “There are now two important policy rates in the UK: base rate and the interest rate at which the Bank of England lends under its TFS programme.”

“This is already a major break with history, when the Bank only lent directly to banks at penal interest rates. In future, there is no reason why the BoE cannot continue to cut the TFS rate and leave Base rates unchanged. In other words, there is no lower bound to the interest rate on TFS.”

Mould says the elephant in the room is debt. “Whether its government debt, corporate debt or consumer debt, the world is more indebted now than it was in 2007.”

 

 

[LiveinHope]

14 hours ago, zugzwang said:

Doesn't the Term Funding Scheme now make the NSFR ratio, and hence Basel III, largely redundant?

https://www.fundstrategy.co.uk/major-break-history-term-funding-scheme-carneys-radical-tool/

 

 

Quote

“There are now two important policy rates in the UK: base rate and the interest rate at which the Bank of England lends under its TFS programme.”

“This is already a major break with history, when the Bank only lent directly to banks at penal interest rates. In future, there is no reason why the BoE cannot continue to cut the TFS rate and leave Base rates unchanged. In other words, there is no lower bound to the interest rate on TFS.”

 

That is insightful, and a little worrying for anyone trying to i) profit from their own work and ii) plan their financial future. It's certainly another reason to consider moving to a country less involved in this mess. To use an analogy, I think the economy has entered an extinction vortex.

[zugzwang]

53 minutes ago, LiveinHope said:

 

 

That is insightful, and a little worrying for anyone trying to i) profit from their own work and ii) plan their financial future. It's certainly another reason to consider moving to a country less involved in this mess. To use an analogy, I think the economy has entered an extinction vortex.

I hate the phrase paradigm change but this really is. Guaranteed lending margins for the banks and implied insurance against the strictures of Basel III thrown in for good measure.

Instructive too, I think, how little discussion of the 'Scheme' there's been. The chatter is still all about how much more Hammond will borrow and spend, no mention of Carney's potentially open-ended contribution to the national debt.

[doomed]

You can't taper a ponzi; more of the same until the eventual collapse.