FSA finalises far-reaching overhaul of UK liquidity regulation

Wookster

This is such an under reported issue.

A friend of mine works as a risk manager for a UK based institution and he is quite worried that the new liquidity rules will make the business much much less profitable, perhaps to the point where it becomes uneconomic.

As Generali says, this is not surprising given how broke we are - I'm sure its the Government's way of ensuring that they can fund the enormous deficits they know they will incur over the next few years before a recovery takes place.

Argentina did something similar before things went belly up.

And there is Gordon saying its absolutely not true that there are hard times ahead.

What planet is he living on??

Thrugelmir

Wookster wrote: »

This is such an under reported issue.

A friend of mine works as a risk manager for a UK based institution and he is quite worried that the new liquidity rules will make the business much much less profitable, perhaps to the point where it becomes uneconomic.

As Generali says, this is not surprising given how broke we are - I'm sure its the Government's way of ensuring that they can fund the enormous deficits they know they will incur over the next few years before a recovery takes place.

Argentina did something similar before things went belly up.

And there is Gordon saying its absolutely not true that there are hard times ahead.

What planet is he living on??

What business will become less profitable? Banks were making money on lending in volume rather than on margin during the credit boom.

Banks will return to be being run by bankers again not salesman. Quality of lending with risk priced in is the order of the day.

There's no possibly no need to worry about inflation or interest rates as a combination of tax rises and reduced credit availability will make growth in the economy long and protracted.

mewbie_2

Wookster wrote: »

And there is Gordon saying its absolutely not true that there are hard times ahead.

What planet is he living on??

Uranus....

Wookster

mewbie wrote: »

Uranus....

No wonder he was looking sour this morning. I wasn't that err normal after Saturday's drinking session

Thrugelmir, The point he was making was that the new liquidity rules will mean that spreads are put under much more pressure and it means that rather than lending the money commercially, it must be invested in government bonds which will no doubt yield a lower return.

drc

How will/should this move affect house prices (if at all)?

Thrugelmir

Wookster wrote: »

Thrugelmir, The point he was making was that the new liquidity rules will mean that spreads are put under much more pressure and it means that rather than lending the money commercially, it must be invested in government bonds which will no doubt yield a lower return.

The regulators are merely trying to rein in the schemes dreamt up to increase lending power, such as off balance sheet securitisation of mortgage books. Fractional Reserve Banking was allowed to get out of control. Holding bonds or other securities is better than holding cash. Bankers will never be poor.

kennyboy66_2

Wookster wrote: »

Thrugelmir, The point he was making was that the new liquidity rules will mean that spreads are put under much more pressure and it means that rather than lending the money commercially, it must be invested in government bonds which will no doubt yield a lower return.

Surely if banks have less money to lend commercially then 'spreads' or the real interest rate that customers pay will increase.

Isn't that how supply and demand works ?