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Metro Bank - It's like 2008 all over again

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No.

Its a small bit of a 2008-ish situation where what should have happened back then happens before is too late.

Metrobank have been found to have junk on its books. The BoE has bollcoked Metro, who either have to raise capital or shutdown in an orderly-ish way.

This is what should have happened in 2002ish with HBoS and RBS but they were all aprt of Brown's Emperor genius of the world scheme.

In MB case, equity is getting reamed,. then bond holders. And he bank management will get sacked.

Now was that all so hard?

 

 

 

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29 minutes ago, spyguy said:

No.

Its a small bit of a 2008-ish situation where what should have happened back then happens before is too late.

Metrobank have been found to have junk on its books. The BoE has bollcoked Metro, who either have to raise capital or shutdown in an orderly-ish way.

This is what should have happened in 2002ish with HBoS and RBS but they were all aprt of Brown's Emperor genius of the world scheme.

In MB case, equity is getting reamed,. then bond holders. And he bank management will get sacked.

Now was that all so hard?

 

 

 

I know some lifelong labour voters who still consider Gordon Brown to be the greatest chancellor we ever had.

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I don't think there will be any bank runs in the UK anymore because everyone is covered with the FSCS up to £85k. Even if a couple of banks go under and the govt needs to print money to cover FSCS, I doubt it would inflate the £ all that much. 

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3 hours ago, dropbear said:

I don't think there will be any bank runs in the UK anymore because everyone is covered with the FSCS up to £85k. Even if a couple of banks go under and the govt needs to print money to cover FSCS, I doubt it would inflate the £ all that much. 

IIRC, the FSCS only applies to individuals, not companies? Additionally, Metro was popular with SMEs, due to no charges if balance was kept > £5,000

edit: if the FSCS compensation doesn't apply to companies, I'd guess that all aware SMEs are moving balances > £5,000 (which must be a lot) elsewhere.

Edited by highYield

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5 hours ago, TheCountOfNowhere said:

.... If you believe them. 

 

After 10+ years of their lies I wouldn't trust them as far as I could throw Gordon brown. 

I think it is a pretty rigorous process. I've been involved in this and it is an exacting exercise. 

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5 hours ago, spyguy said:

 

Metrobank have been found to have junk on its books. The BoE has bollcoked Metro, who either have to raise capital or shutdown in an orderly-ish way.

This is what should have happened in 2002ish with HBoS and RBS but they were all aprt of Brown's Emperor genius of the world scheme.

In MB case, equity is getting reamed,. then bond holders. And he bank management will get sacked.

Now was that all so hard?

Just to clarify, Metro have held the wrong amount of capital against certain assets and so have been holding too little. But I don't think that there is anything wrong with the assets themselves - I  have not read that they are having higher defaults on the assets. 

Also, Metro actually had quite high capital ratios before the PRA noticed the error so the shortfall really isn't that great. 

I think it's lucky that this was identified in a period of relative economic calm. Had it been in a recession then things could have got very nasty. 

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19 hours ago, scottbeard said:

it won't be until interest rates have normalized

Interest rates probably won't "normalise" to a value people classify as normal. Look at the macro trend. All the way down. 

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15 hours ago, dropbear said:

I don't think there will be any bank runs in the UK anymore because everyone is covered with the FSCS up to £85k. Even if a couple of banks go under and the govt needs to print money to cover FSCS, I doubt it would inflate the £ all that much. 

Most people who rely on relatively 'instant' access would still be left in a perilous state if they left their money there. From the FSCS ….

How long will it take to process my investment claim?

After a firm is declared in default, we'll aim to process your claim within six months of you submitting your application. Delays may occur, however, if your claim is particularly complex or if we're waiting on further information from third parties.

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1 hour ago, dugsbody said:

Interest rates probably won't "normalise" to a value people classify as normal. Look at the macro trend. All the way down. 

It depends what you think people classify as "normal".  Factually, over the entire history of the Bank of England since 1694 about 4% to 5% is a usual range for their base rate.  In recent times people began to think of rates rather higher than this as "normal" as their minds were biased by the 1970s/80s/90s when rates were unusually high.

So whilst the trend since the 1970s has been down, that is actually from the all-time high in that 325 year period, so it's not surprising they've come down.

Of course, in the last 10 years interest rates have been very low.  10 years of low rates may seem a long time to us now, but it's the blink of an eye in the 325 year history of the B of E.

In my mind the 2007/8 crisis can be considered over when interest rates return to that more normal range of 4%-5%.  I don't know when that will happen - it could certainly be another 10 years, but then since the 2007/8 crisis was the most significant for nearly 100 years (and maybe ever) its not surprising it takes a long time to normalize.

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13 hours ago, Ah-so said:

Just to clarify, Metro have held the wrong amount of capital against certain assets and so have been holding too little. But I don't think that there is anything wrong with the assets themselves - I  have not read that they are having higher defaults on the assets. 

Also, Metro actually had quite high capital ratios before the PRA noticed the error so the shortfall really isn't that great. 

I think it's lucky that this was identified in a period of relative economic calm. Had it been in a recession then things could have got very nasty. 

OK,, not junk. Very mispriced.

As far as BTL defaults, well, BTL is very new.

Going by the number of 2month+ voids Im seeing, I reckon the BTL sector is very very distressed.

 

 

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20 hours ago, dropbear said:

I don't think there will be any bank runs in the UK anymore because everyone is covered with the FSCS up to £85k. Even if a couple of banks go under and the govt needs to print money to cover FSCS, I doubt it would inflate the £ all that much. 

They absolutely would have to print money to cover the likely liabilities of couple of banks going under, even just one big one.   There's only a small amount in the FSCS pot.   Although if one big UK bank actually went bankrupt, it would likely cause the entire UK banking system to implode as almost happened in 2008 (apparently we were hours away).

Far more likely is the printing of enough money to give to the bank such that the bank can stay solvent - converting 'bank credit' (ie. the bank's liabilities) to 'base money' would be massively inflationary.   Bank credit is not money, it's just fungible with it under 'normal' circumstances.

If they literally did have to print money to directly cover deposits, by the time the customers actually received said money in a spendable form it likely would purchase a whole lot less than it did before the bank went bust.

 

 

 

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5 minutes ago, Sour Mash said:

If they literally did have to print money to directly cover deposits, by the time the customers actually received said money in a spendable form it likely would purchase a whole lot less than it did before the bank went bust.

Including houses?

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12 minutes ago, rantnrave said:

Including houses?

Maybe, maybe not.  House Prices are largely determined by cost/availability of credit and I'd expect credit to dry up in the event of a banking crisis.

On the other hand, if there was runaway inflation it would tend to support nominal prices (whereas 'real' prices could still be lower but that's not much use to you if your purchasing funds are all held as cash in the inflating currency).

 

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3 hours ago, spyguy said:

OK,, not junk. Very mispriced.

As far as BTL defaults, well, BTL is very new.

Going by the number of 2month+ voids Im seeing, I reckon the BTL sector is very very distressed.

You have been predicting doom for the BTL sector for some time now but it doesn't seem to be happening.

Even if rents have fallen it is not by any great amount and cheap BTL mortgages still seem to be freely available. I was in the Nat West this morning and saw a poster advertising BTL I/O mortgages at what seems like a very low rate, even after factoring in the fee.  

Looking at their website they are offering a range of BTL mortgages from well under 2% if you have a 40% deposit to 2.12% with at 25% deposit.

E.g

Buy to Let - 5 year fixed rate 2.13% 4.74% 60% £995

 

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8 hours ago, scottbeard said:

In my mind the 2007/8 crisis can be considered over when interest rates return to that more normal range of 4%-5%.  I don't know when that will happen - it could certainly be another 10 years, but then since the 2007/8 crisis was the most significant for nearly 100 years (and maybe ever) its not surprising it takes a long time to normalize.

I don't think real rates will reach those levels again. We are producing excess and therefore inflation is low, therefore the risk free rate is low.

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32 minutes ago, dugsbody said:

I don't think real rates will reach those levels again. We are producing excess and therefore inflation is low, therefore the risk free rate is low.

Ithink rates for rifferent risk and assets are going diverge. A lot.

Try Amigo lians. Apr is well above 20%

I dont think we are producing a lot. We were flooded by chinese mercantilist policy. Now china pop is falling and tarrifs are rising.

US labour market is totally redhot.

UKs is warm to frozen, as its bordering on impossible to hire skilled staff. Well, at least relocate them.

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37 minutes ago, dugsbody said:

I don't think real rates will reach those levels again. We are producing excess and therefore inflation is low, therefore the risk free rate is low.

currently yes. The China boost is coming to an end, and not being replicated by Africa or India.

but it could still take decades to work through the system

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1 hour ago, Si1 said:

currently yes. The China boost is coming to an end, and not being replicated by Africa or India.

but it could still take decades to work through the system

Automation and efficiency are only ever going to increase.

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6 hours ago, Confusion of VIs said:

You have been predicting doom for the BTL sector for some time now but it doesn't seem to be happening.

Even if rents have fallen it is not by any great amount and cheap BTL mortgages still seem to be freely available. I was in the Nat West this morning and saw a poster advertising BTL I/O mortgages at what seems like a very low rate, even after factoring in the fee.  

Looking at their website they are offering a range of BTL mortgages from well under 2% if you have a 40% deposit to 2.12% with at 25% deposit.

E.g

Buy to Let - 5 year fixed rate 2.13% 4.74% 60% £995

 

You know plenty btlers willing to punt £40k to £160k to but a rental? 

 

The trouble with gready desperate ####s chasing dreams is they've nowt to begin with. 

 

Those interest rates are fantasy for 90% of the country and with prices falling the magic mew money wont be providing any more 40% deposits... Then the fun begins. 

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22 minutes ago, dugsbody said:

Automation and efficiency are only ever going to increase.

Yeah, and been ongoing since the middle ages....

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10 minutes ago, TheCountOfNowhere said:

You know plenty btlers willing to punt £40k to £160k to but a rental? 

The trouble with gready desperate ####s chasing dreams is they've nowt to begin with. 

Those interest rates are fantasy for 90% of the country and with prices falling the magic mew money wont be providing any more 40% deposits... Then the fun begins. 

I don't know anyone looking to get into BTL now but I do know lots who got into it 10 years ago. Many of my colleagues seem to have at least 1 BTL and being able to get a 2% mortgage fixed for 5yrs puts off the day of reckoning for at least that long.

For me the fact that these rates are still on offer indicates that the banks are not expecting any rise in interest rates for many years so even many of the Mewing muppets will be able to hang on.

I looks like we will have to rely on s24 to start the ball rolling and hopefully frighten the banks out of the BTL market.

 

 

 

 

 

 

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1 hour ago, Confusion of VIs said:

I don't know anyone looking to get into BTL now but I do know lots who got into it 10 years ago. Many of my colleagues seem to have at least 1 BTL and being able to get a 2% mortgage fixed for 5yrs puts off the day of reckoning for at least that long.

For me the fact that these rates are still on offer indicates that the banks are not expecting any rise in interest rates for many years so even many of the Mewing muppets will be able to hang on.

I looks like we will have to rely on s24 to start the ball rolling and hopefully frighten the banks out of the BTL market.

 

 

 

 

 

 

Low rates are a central bank response to S24 etc. They are deliberate in order to soften the blow.

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