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Could house prices fall by half? FSA Stress tests.
*MF*
Posts: 3,113 Forumite
Information begins to emerge of how the FSA is "stress testing" the Banks and Building Societies, extracts here:
Financial regulators acknowledged the possibility of unemployment rising by another 1.5 million and the average house price halving to only £93,000.
The key assumptions in the stress test were that the economy would shrink by 6 per cent from peak to trough with growth not returning until 2011 and trend growth not until 2012.
The regulators also assumed unemployment rising to 12 per cent of the workforce, or 3.7 million people, which is 1.5 million more than the present number and would be a higher level of joblessness even than in the recession of the early 1980s.
Finally, the FSA posited a 50 per cent fall in house prices from their peak and a 60 per cent fall in commercial property prices - office blocks and shops.
Implied, but not explicitly stated in the FSA statement, was that all banks and building societies passed the test — their capital cushions never falling below 4 per cent of assets even after such a hypothetical economic storm.
Extracts from here:
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6383107.ece
Financial regulators acknowledged the possibility of unemployment rising by another 1.5 million and the average house price halving to only £93,000.
The key assumptions in the stress test were that the economy would shrink by 6 per cent from peak to trough with growth not returning until 2011 and trend growth not until 2012.
The regulators also assumed unemployment rising to 12 per cent of the workforce, or 3.7 million people, which is 1.5 million more than the present number and would be a higher level of joblessness even than in the recession of the early 1980s.
Finally, the FSA posited a 50 per cent fall in house prices from their peak and a 60 per cent fall in commercial property prices - office blocks and shops.
Implied, but not explicitly stated in the FSA statement, was that all banks and building societies passed the test — their capital cushions never falling below 4 per cent of assets even after such a hypothetical economic storm.
Extracts from here:
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6383107.ece
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So, if that is how they measure their worst scenario on the "downside" - are they still missing the main issue?
When the "authorities" explain in detail how they will address, not the "downside", but the unrealistic upward movements in prices, based largely on large global capital movements then maybe I would be reassured they know what they are doing.
It was the unrealistic "upside", and the regulatory and political blindness to the risks, which caused the problems, surely?
When anything halves in value - the question for me remains, "what caused it to double in the first place"?
When anything halves in value - the question for me remains, "what caused it to double in the first place"?
If many little people, in many little places, do many little things,
they can change the face of the world.
- African proverb -
they can change the face of the world.
- African proverb -
0
Comments
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lostinrates wrote: »
Apologies! Didn't realise this was a duplication! I broke my ankle recently and have not been around much to catch up.
It won't let me delete afaik - so could members just ignore this duplication, please.If many little people, in many little places, do many little things,
they can change the face of the world.
- African proverb -0 -
Apologies! Didn't realise this was a duplication! I broke my ankle recently and have not been around much to catch up.
It won't let me delete afaik - so could members just ignore this duplication, please.
LOL, nothin to polise for
I would have thouht a broken ankle gave you more time on here...not less! 0 -
It should - unless you "underestimate" the time spent at an NHS hospital getting X-Rays and plastercasts
and "overestimate" your ability to operate a pedal bin while using crutches and standing on one leg!!!
;-))If many little people, in many little places, do many little things,
they can change the face of the world.
- African proverb -0
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