BBA pushes for no ring-fencing - I think they are wrong

Thrugelmir

pqrdef wrote: »

The government has to wriggle off the stake it's impaled itself on without saying yes or no to future bail-outs. I hope the Treasury's finest brains are on this one.

Would difference does splitting the banks make?

NR nor B&B were investment banks. In fact taxpayers have currently lent NRAM £45 billion to keep the operation solvent.

Generali

purch wrote: »

Only if the Investment Banking division actually makes any money.

If the Investment Banks hadn't made huge losses, we wouldn't be in this mess in the first place.

The losses were made in retail banking but the risk had been transferred to the investment banks (and pensions).

Investment bankers generally don't need sub prime mortgages! They do often need jumbo loans I admit :0).

treliac

Generali wrote: »

The losses were made in retail banking but the risk had been transferred to the investment banks (and pensions).

And now it's transferred to the public sector.

I've posed the question elsewhere, but, if it comes to it, is another tax payer bailout for banks feasible?

Thrugelmir

Loughton_Monkey wrote: »

They'll have to put up saving rates to attract a lot more cash! As a net saver, bring it on! Meanwhile, the mortage famine would get worse and mortgage rates would go up. Fine by me.

May be the natural outcome as banks globally retract their operations.

US banks have effectively blackballed Greece, Spain, Portugal and Ireland.

HSBC has recently announced cutting back its operation in the US, Russia and Poland.

RBS since 2009 has cut back and sold operations in Slovakia, Romania, Uzbekistan, India, China, Cayman Islands and Australia to a name few.

Generali

treliac wrote: »

And now it's transferred to the public sector.

I've posed the question elsewhere, but, if it comes to it, is another tax payer bailout for banks feasible?

Not a major one like 2007/8 IMO, no. Not without printing money to do it.

The joy of a fiat currency is that you can have as much of it as you want. Of course that is also the limitation of one.

IronWolf

Thrugelmir wrote: »

Profits on investment banking subsidises retail banking.

Retail banking is already suffering from loss of income (and therefore cross subsidy) from charges and PPI.

Its no use posting profits of £5bn a year, having half that go to staff on bonuses, then one year post a £200bn loss.

I think you'll find it's the tax payer that's subsidising retail banking.

IronWolf

pqrdef wrote: »

But it's mostly because banks depend on confidence. The mere threat of bank failures stops the wheels turning. If you actually set a bank up to fail, it'll collapse straight away. Who will lend to a UK investment bank if the government says right, that's it, you're on your own now, no bail-outs? The continued existence of the big UK banks pretty much depends on people allowing themselves to believe that the government won't let them go under.

OMG you mean lenders will actually have to CHECK whether an investment bank is being responsible when they allow them to leverage up to 40 to 1?

Perish the thought

kabayiri

Using Angela Knight as a spokesperson to make this suggestion is poor.

She is a VI mouthpiece of the BBA, further dicredited by the PPI handling.

pqrdef

Thrugelmir wrote: »

Would difference does splitting the banks make?

I don't think it helps any which way. In fact I doubt if the retail banking model is even viable. Captain Mainwaring is dead.

IronWolf

The rationale behind splitting retail and investment banking is that the retail banks remain immune to the losses of the investment arms.

The whole 2008 crisis was because of the danger of retail arms shutting down and people/businesses not having access to their funds. The credit markets completely dried up because banks didnt have the funds to lend out anymore, the investment arms had caused them huge leveraged losses. ATM machines would have stop giving out cash. It would have been anarchy.

Whilst splitting off retail banks wont avert a crisis of this kind it at least lessens the effects and dangers.