Tuesday, October 7, 2008

RBS shares down 30% in early trading

RBS credit rating cut by Standard & Poor's

Royal Bank of Scotland has had its credit rating cut for the first time in almost a decade by Standard & Poor's on fears about its weakening financial outlook.

Posted by gardeniadotnet @ 09:35 AM (1304 views)
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15 thoughts on “RBS shares down 30% in early trading

  • gardeniadotnet says:

    Is this the bank Robert Peston wouldn’t name on Saturday?

    Reply
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  • gardeniadotnet says:

    Correction: Friday. How time flies.

    Here it is for those who missed it…

    Pestons Pick’s 3rd October

    UPDATE 15:16 Although HBOS is perceived in the market to be particularly strapped for cash, and is therefore a significant beneficiary of the Bank’s new-found largesse, it isn’t the bank that was having difficulty renewing credit in the money markets this morning.

    That was another of our big banks – which only goes to show that the liquidity drought (which was acute again this morning) is vicious and pervasive.

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  • matt_the_hat says:

    Is it me or is it just insane that a middle man (the banks) can make so much money from taking money from one person and lending it to another. Surely this is just one big drag on the economy. Nationalise the lot and just cover the risk of default.

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  • Can I add that Peston named three banks:

    … last night a trio of the UK’s biggest banks – Royal Bank of Scotland, Barclays, and Lloyds TSB – signalled to the Alistair Darling that they’d like to see the colour of taxpayers’ money rather quicker than he might have expected.
    According to Peston, the three have asked for up to £15bn each in capital injections, in exchange for a Treasury stake in the banks.
    On paper, Lloyds TSB, RBS and Barclays don’t have a pressing need for additional capital.
    But they have become concerned that they are being weakened significantly by investors’ perception that they are short of capital and their balance sheets need to be strengthened.

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  • matt, the banking world is upside down to ours.

    If you loaned someone £1,000, you wouldn’t be able to use that money yourself until it was repaid.

    If a bank loans you £1,000, it shows on their balance sheet as an asset (their asset not yours)

    Assets are uselful and can be used for a number of purposes, like uh hum, security for a loan.

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  • beartil2010 @ 9.50
    they have become concerned that they are being weakened significantly by investors’ perception that they are short of capital

    so publically asking for cash is going to calm people’s fears? unlikely.

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  • Yes – the central problem in the whole mess – accounting.

    I want to propose an update to a famous phrase:

    Lies, damn lies, and accounting.

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  • I believe Roubini – it’s more the corporations moving their cash from deposits into government bonds that is removing capital from banks.

    But I agree with you anyway. Bunch of chimps at the top don’t realise that some of the ‘proles’ out there are actually quite smart and can see what’s happening.

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  • i said this bank looked unsafe a few times, but people on here slated me for it…. welllllllllllll

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  • I’ve thought of a way the government can sort this out: If a bank goes 20bn over its overdraft limit they should be sent a letter telling them so and should be charged 100bn for the admin on sending the letter. This would really help the banks with their liquidity problems.

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  • 5. malct said…”If a bank loans you £1,000, it shows on their balance sheet as an asset (their asset not yours)”

    Why should that not be the case?

    If I’m worth a hundred quid and I deposit it at/loan it to the bank then I am not suddenly broke as it’s still my hundred quid (i.e. my asset).

    If I have a house and I ‘lend’ it to a tenant, I might not be able to occupy it but it is still my asset (and I can use it to raise finance if I wish).

    Doesn’t the bank just have £1000 less on deposit and £1000 more in assets?

    And please, – no simplistic lectures on banks creating money out of thin air, but not creating the interest!

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  • p.off

    “And please, – no simplistic lectures on banks creating money out of thin air, but not creating the interest!”

    ah so you have learned something, it really is that simple. Glad you mentioned it not me! lol

    seriously though, my point is that the banks can legally make use of that £1,000 whereas you and I can’t.

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  • p.off “And please, – no simplistic lectures on banks creating money out of thin air, but not creating the interest!”
    ah, so you’ve learned something then, it really is that simple. Glad you mentioned it and not me! lol

    My point was that the banks have legal use of that £1,000 whereas you and I don’t.

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  • Well, strictly speaking from your original deposit the bank still has £1,000 on deposit and £10k in ‘assets’ ie. loans based on that £1k at the standard fractional reserve rate.

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  • If banks create money out of thin air, why do they need to borrow it from each other? and when a bank borrows from another bank, was that money created out of thin air too? Why doesn’t the borrowing bank just go and create some for themselves instead?

    Why is there a liquidity crisis anyway, the bank could just keep the money they have created? Why do we now have a problem with banks not trusting each other – why did they ever trust each other in the first place when they know that the money they wish to borrow isn’t real anyway as it has probably been freshly created out of nothing?

    With the banks creating money willy-nilly in this way, why would anybody think that a world economy based on ‘nothing’ was sustainable?

    Answers on a postcard please Gordon/Alistair.

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