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Jail Reckless Bankers?
Comments
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I believe RBS for example got to a point where they were holding so little (real) capital against lending, that a default rate of less than 0.5% could bring them down.
I guess that would be what 'they' mean by 'reckless mismanagement'
If the banks are too big to fail, then consider the effects of an industry-wide failure in the railway industry.
TruckerTAccording to Clapton, I am a totally ignorant idiot.0 -
Rail industry is peanuts compared to banking.
Just think what would happen if it didn't run."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
....If the banks are too big to fail, then consider the effects of an industry-wide failure in the railway industry.
...
We've already had an "industry-wide failure in the railway industry".That is true, but I believe RBS for example got to a point where they were holding so little (real) capital against lending, that a default rate of less than 0.5% could bring them down.
Yes, that's where I'd be coming from as well.0 -
It's inherently risky in principle, but it's banking. It's doable because the BoE does emergency liquidity support, on the quiet usually. Without that, failures of basically solvent banks owing to refinancing difficulties would be relatively frequent, as they used to be.All normal retail banks lend long and borrow short: they are doing that today.
What was new was financing from wholesale markets rather than deposits. Banks didn't used to do that. They seem not to have appreciated the risk of the wholesale markets turning hostile - but it's their job to understand their business.
Still, no matter, the Bank stepped in, crisis over.
The real problem at NR turned out to be that the wholesale markets were correct in their suspicions - the loan book was rotten. Criminally reckless lending."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
It's inherently risky in principle, but it's banking....
Aka 'liquidity transformation' . And as you say, 'doable' .....What was new was financing from wholesale markets rather than deposits. Banks didn't used to do that. They seem not to have appreciated the risk of the wholesale markets turning hostile - but it's their job to understand their business.....
That's my understanding as well. From about 2001 onwards, and notwithstanding the arguments there might have been about credit risk, there clearly was a liquidity risk involved which no one took any account of. Reckless regulation if you ask me.:)...The real problem at NR turned out to be that the wholesale markets were correct in their suspicions - the loan book was rotten. Criminally reckless lending.
The NR loan book was at least sufficiently rotten to have wiped out NR.0 -
It's inherently risky in principle, but it's banking. It's doable because the BoE does emergency liquidity support, on the quiet usually. Without that, failures of basically solvent banks owing to refinancing difficulties would be relatively frequent, as they used to be.
What was new was financing from wholesale markets rather than deposits. Banks didn't used to do that. They seem not to have appreciated the risk of the wholesale markets turning hostile - but it's their job to understand their business.
Still, no matter, the Bank stepped in, crisis over.
The real problem at NR turned out to be that the wholesale markets were correct in their suspicions - the loan book was rotten. Criminally reckless lending.
It's difficult to say, except in hindsight whether borrrowing from the wholesale markets is inherently more risky that borrowing from other sources.
Why is seeking funding world wide more risky than borrrowing only from the UK?
The financial meltdown in 07/08 was a unique event that involved the world's banks.
I'm not sure that we can simply say it's their job to understand their business... events happen. The question was was it reckless?
The rotten loan book and poor capital ratios may well have been reckless although many of the 'rotten' loans may have gone rotten because of the meltdown and subsequent recession.0 -
grizzly1911 wrote: »Just think what would happen if it didn't run.
Why would a railway stop running because of bankruptcy? Rangers still play football in the same infrastructure having been wound up.0 -
Why would a railway stop running because of bankruptcy? Rangers still play football in the same infrastructure having been wound up.
I am not saying they wouldn't continue to run, just asking the what would happen if they did, say a supplier removed key bits of the track, because they hadn't been paid, for instance.
Banks aren't the only thing that keeps life moving. ( I acknowledge they play a big part).
Presumably rangers could play in the local park if push came to shove."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
grizzly1911 wrote: »I am not saying they wouldn't continue to run, just asking the what would happen if they did, say a supplier removed key bits of the track, because they hadn't been paid, for instance.
Banks aren't the only thing that keeps life moving. ( I acknowledge they play a big part).
Presumably rangers could play in the local park if push came to shove.
slightly pointelss, but if a supplier removed a key bit of track they would be charged with theft and probably attempted murder.0
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