Bad News for Banks....

Generali

....and their shareholders, i.e. you.

http://www.nytimes.com/2012/11/30/business/global/british-banks-may-be-undercapitalized-bank-of-england-governor-warns.html

British banks need more capital to protect them against fallout from the crisis in the euro zone, the Libor rate-manipulation litigation and other potential costs, the Bank of England warned Thursday......

Capital ratios at the four biggest British banks — Barclays, Royal Bank of Scotland, Lloyds Banking Group and HSBC — could be overstated by £5 billion to £35 billion, or $8 billion to $56 billion, according to a hypothetical example in the report. That means that the banks would, under certain situations that the central bank did not disclose, need to raise an additional £5 billion to £35 billion.

The central bank declined to give a more concrete figure on how much it thought the banks should raise. Mr. King, whose term as governor ends next summer, has previously suggested that banks should cut bonuses and use the money to expand capital buffers. He has repeatedly warned during his tenure that banks’ capital cushions are too thin.

Pretty bad news for anyone looking to borrow too, unless the BoE steps up with more QE of course.

purch

Generali wrote: »

Pretty bad news for anyone looking to borrow too.........

.......or anyone hoping for high inflation anytime soon.

Generali

purch wrote: »

.......or anyone hoping for high inflation anytime soon.

Well indeed. I almost resurrected Deflation Watch for this one. In the absence of QE this will put downward pressure on the M4 measure of money supply yet again. M4 seems to be rising again, albeit that it's down -3.2% YoY.

Of course the Americans have excused themselves from Basle III so this isn't a problem to them.

ILW

Ohhh, Lets see some lovely deflation.
Sorts out the !!!!less from the prudent.

Generali

ILW wrote: »

Ohhh, Lets see some lovely deflation.
Sorts out the !!!!less from the prudent.

In some ways we already have. Falling real wages are a form of deflation-lite.

pqrdef

A nicely coded message from Merv. So the options for the banks are (a) reduce their borrowing and lending (joke), or (b) raise equity with a rights issue (joke), or (c) sell some more shares to the government (joke).

Somebody laugh.

ILW

Generali wrote: »

In some ways we already have. Falling real wages are a form of deflation-lite.

Lets see prices follow, then we will all be happy (except the indebted).

ILW

pqrdef wrote: »

A nicely coded message from Merv. So the options for the banks are (a) reduce their borrowing and lending (joke), or (b) raise equity with a rights issue (joke), or (c) sell some more shares to the government (joke).

Somebody laugh.

Off topic, but that Tucker bloke does not appear to be a happy bunny.

Generali

Yellowsub wrote: »

So very bearish for house prices then, especially in London where the banks will be hit the hardest.

Maybe. House prices in London have held up pretty well so far despite the travails of the banks.

Generali

Yellowsub wrote: »

You could say it hasnt yet filtered through. These things take time.

5 years and counting.

Generali

Yellowsub wrote: »

Another 5 and London average property will be a lot lower than today. 100% guaranteed.

You should change your username from Yellowsub to TimeMachine!