Scandalised!

HAMISH_MCTAVISH

neverdespairgirl wrote: »

What about the Britannia, Hamish? Wasn't the hasty sale to the Co-op arranged because of buy-to-let mortgages going bad?

No.

The main problem there is commercial lending.

Moody's said the "problem loan ratio" had increased by the end of 2012 to 10.9% from 8.1%. Most of it is commercial real estate (CRE) – in other words, office blocks, shopping centres and industrial premises.

The bank said today that of its total commercial loan book of £9.4bn, £1.7bn is classified as "impaired", which means the repayments are not being met on time.

The big problem is with 12 big loans (it won't say to whom) that account for £900m of the problem.

The latest report and accounts show that total impairment losses were £351m in 2012, and that a significant proportion of the Co-op's CRE loans had been downgraded, with many moving into a "default category". Given the Moody's report, the worry is that these impairments are worsening.

To put the them into context, the total income for the Co-operative Banking Group in 2012 was £1.4bn and its operating costs were £713m.

The impairment losses, plus the fact it had to set aside £150m for payment protection insurance claims, helped send the bank into a huge loss last year of £662m.

http://www.guardian.co.uk/money/2013/may/10/coop-downgrade-is-money-safe

A much smaller secondary problem is with a small percentage of residential mortgages from Brittania's old "optimum' book, mainly BTL, of which many (around 10%) are in negative equity.

Arrears on this segment of the portfolio (not, it should be noted, on the entire residential loan book, just on the 25% of it that is from the old 'Optimum' portfolio), are twice the industry average.

However twice the industry average is still, really, very low.

And that twice the average only applies to a quarter of their residential loan book.

It's nowhere near problematic enough to tip the overall residential book into making losses, let alone bring down the entire bank by itself.

TruckerT

Does it really matter about how the banks threw their money away?

They failed, and we are all paying the price - except the bankers, maybe?

TruckerT

CLAPTON

TruckerT wrote: »

Does it really matter about how the banks threw their money away?

They failed, and we are all paying the price - except the bankers, maybe?

TruckerT

Of course is really matters


Without understanding how the problems arose, there is no hope of preventing it in the future; even worse the totally wrong 'solutions' are arrived at.

Thrugelmir

No UK bank was brought down by defaults on UK residential mortgage lending. The overall quality of those books, even Northern Rock's, was actually pretty good.

Why was it nationalised then?

In late 2007 and early 2008 the Treasury conducted a comprehensive review of the long-term options for Northern Rock. It considered the deliverability of private sector bids for the bank, but concluded that there was insufficient prospect of their attracting the financial backing or demonstrating the resilience needed for a viable solution. Public ownership therefore became the best course in the interests of the taxpayer.

Allowing Northern Rock to fall into administration
would have prevented depositors from accessing
their money and entailed potential taxpayer losses of
between £2 billion and £10 billion.

http://www.nao.org.uk/report/hm-treasury-the-nationalisation-of-northern-rock/

ruggedtoast

HAMISH_MCTAVISH wrote: »

I read it twice.

Which part am I wrong about?



Absolutely.

No UK bank was brought down by defaults on UK residential mortgage lending. The overall quality of those books, even Northern Rock's, was actually pretty good.

They did some pretty dumb things overseas (75% of losses) and some more dumb things with commercial lending (most of the other 25% of losses), but they managed to remain quite prudent overall with UK residential mortgage lending.

It's pretty difficult to write bad mortgages if the government of the country in which you are based makes it's tax payers pay your borrower's mortgages for them when they can't themselves. Either buy to let novices bailed out by an engineered housing shortage and tenant's unlimited housing benefit entitlement, or genuinely distressed homeowners.

Instant negative equity 125% mortgages (probably IO)? There was nothing 'prudent' about the loans the likes of Northern Rock issued in the housing boom, or the useless regulatory apparatus that allowed them to do it.

Now years on you are complaining about government cuts, well this is why the government doesn't have any money. Its going on corporate welfare for banks.

TruckerT

CLAPTON wrote: »

Of course is really matters


Without understanding how the problems arose, there is no hope of preventing it in the future; even worse the totally wrong 'solutions' are arrived at.

It only really matters because the banks are refusing to relinquish their 'too big to fail' status, and politicians are powerless to reduce their power.

There have been numerous failures in other areas, such as retail etc, but there was no overwhelming urge to bail out Woolworths, for example.

What are the totally wrong solutions to which you refer?

TruckerT

Thrugelmir

TruckerT wrote: »

There have been numerous failures in other areas, such as retail etc, but there was no overwhelming urge to bail out Woolworths, for example.

Woolworths had been struggling for years. The High Street has changed. Business failures are a fact of life. Letting the banks fail wasn't the answer. Measures will be adopted in the years to come that will change the landscape.

CLAPTON

TruckerT wrote: »

It only really matters because the banks are refusing to relinquish their 'too big to fail' status, and politicians are powerless to reduce their power.

There have been numerous failures in other areas, such as retail etc, but there was no overwhelming urge to bail out Woolworths, for example.

What are the totally wrong solutions to which you refer?

TruckerT

RBS is owned by the government

Llyoyds is virtually owned by the government

the CEO of RBS has just been sacked by the government

Nationwide has just been told to increase its reserves (i.e. reduce it's lending) by the government

The CEO of Barclays was sacked by the government

In what way is the government not is charge?

TruckerT

Thrugelmir wrote: »

Measures will be adopted in the years to come that will change the landscape.

The 'landscape' has changed more in the 21st century than Mrs Thatcher changed it during the 1980s.

It will, no doubt, continue to change.

Ideally, the influence of 'money' would decline.

TruckerT

TruckerT

CLAPTON wrote: »

RBS is owned by the government

Llyoyds is virtually owned by the government

the CEO of RBS has just been sacked by the government

Nationwide has just been told to increase its reserves (i.e. reduce it's lending) by the government

The CEO of Barclays was sacked by the government

In what way is the government not is charge?

It's not in charge - it's in a panic!

TruckerT