Funding for lending: Epic Fail

Wookster

For anyone interested, Alphaville has done a good article on this.

So Lloyds has drawn down £3bn and shrank lending by £3bn in the final quarter. RBS has drawn down £750m and shrank landing by £1.7bn in the quarter, while Santander has drawn £1bn and shrank by £2.8bn. Only Barclays seems to be on message, drawing £6bn and managing a cumulative £5.7bn in additional lending since the FLS was introduced at the end of June last year.

So it has not stopped overall deleveraging, and as some commentators have pointed out deposit rates have dropped by about 1% since the scheme was introduced!

http://ftalphaville.ft.com/2013/03/04/1407842/an-fls-fail/

HAMISH_MCTAVISH

Yes, we've been trying to point this out to Dev for some time.

It's not a prop.

It's a toothpick.

pop_gun

When gimmicks like the FLS fail you know the banks are listening to the government and sacrificing businesses to save distressed homeowners.

andyroberts1967

I'm no expert, but does anyone think that this is because people are wary of borrowing full stop? You can't force people to borrow if they don't want to.

HAMISH_MCTAVISH

andyroberts1967 wrote: »

I'm no expert, but does anyone think that this is because people are wary of borrowing full stop? You can't force people to borrow if they don't want to.

No of course not.

Banks are rejecting up to 90% of applications for higher LTV mortgages as they must ration limited funding.

michaels

Wookster wrote: »

For anyone interested, Alphaville has done a good article on this.



So it has not stopped overall deleveraging, and as some commentators have pointed out deposit rates have dropped by about 1% since the scheme was introduced!

http://ftalphaville.ft.com/2013/03/04/1407842/an-fls-fail/

I guess if you assume the objective is more lending then the policy appears to have failed (although we don't know what the counterfactual would have been).

However if the objective was to quietly continue refinancing the banks by improving their gross interest margins whilst at the same time rewarding those borrowers with good deposits and excellent credit (dare I say it generally tory supporters?) then the policy has been a huge success...

purch

I think it does show that the Government, politicians in general and the FSA still have no idea what actually happened, and the time and measures required to fix the Banking system and the economy as a whole.

Thrugelmir

Funding for lending: Epic Fail

Wookster, I think you are missing the point. Lending was projected to fall as banks deleverage. The BOE has merely stepped in to make the shock of adjustment less steep.

Also banks such as ING are exiting the UK lending market entirely. Which is compounding the problem.

Conrad

With FFL on one shoulder and the FSA capital adequacy and retail mortgage rules on the other, it's hard to see how this can work.

MP's are too far removed from this market to understand this.

As I've bored you all to death with, until the FSA is reformed lending will remain lumpy.
It will be soooo annoying when some bright eyed minister with a new and awesome plan to reform the FSA finally cottons onto something us plebs have known for yonks.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Yes, we've been trying to point this out to Dev for some time.

What you have actually been trying to explain to me is that funding for lending hasn't worked because lending hasn't reached and passed the last record set for lending. We all know that to you it hasn't worked unless it's broken 2007 records (that stands for most things).

What I've been saying that that funding for lending has been influencing the market, in terms of where we would have been without it.

I.e. how many fewer loans would there have been without FFL?

We don't know.

Thrugelmir

Conrad wrote: »

As I've bored you all to death with, until the FSA is reformed lending will remain lumpy.
It will be soooo annoying when some bright eyed minister with a new and awesome plan to reform the FSA finally cottons onto something us plebs have known for yonks.

Conrad accept the fact that the party's over. New rules = New Game.