Impact on banks after house price crash

missile

The "experts" have been predicting a crash for .......... years. I for one will not be losing any sleep that it will happen any time soon and so what if it does? Why worry about tomorrows potential problems, when the rising interest rates are causing some people real hardship today!

baby_boomer

One of the FSA's jobs is to get the banks to put "what if?" scenarios through their computer systems and to ensure that banks have sufficient capital backing.

Addiscomber

Surely deposits in British banks, and foreign banks doing business here, are protected by some scheme or the other, up to a certain level?

baby_boomer

Yes. The first £2K of savings and 90% of your next £33K. Although the protection scheme is financed by the banks themselves.

Addiscomber

Maybe not so good then. Although presumably this is what the "What if" scenarios that the FSA requires are looking at.

baby_boomer

I wouldn't lose any sleep over it, although personally if I've ever got £50K moving between investments I do tend to split it between two banks because of the extra piece of mind the FSCS protection scheme provides.

EdInvestor

Most banks have sold off the mortgages via "mortgage securitisation" these days, so they won't be hit by any major defaults.Rather it would be the investors in the securitised loan packages: which are more likely to be your pension fund than your bank, and could quite easily be foreign investors, not UK companies or pension funds at all.

Historically, when any small BS has got into trouble, a merger has been arranged with another larger BS, so I wouldn't worry.

amcluesent

Of course before 'prudent' Gordon sold off the UK's gold reserves at a historically low price, the Bank of England could be the guarantor of last resort. Now even they just back promises on bits of paper with other bits of Euro paper.

On the plus side, the son of the manse and pension thief will be going to the country with dole queues lengthening, houses repossessed, bankrupts all about, factories closing and those lucky enough to have a job paying crippling interest rates on the debt that fuelled Brown's new labour economy.

jamesd

Remember that Barings collapsed but the losses were not to those with savings accounts or loans. ING bought that ongoing business.

Those who lost money were those who had lent the bank money via bonds and those who owned the shares: the two groups at risk who provided capital after (in theory, in the presence of fraud) assessing the risk they were taking. We've seen more than enough cases of top 100 companies becoming bankrupt or nearly so that nobody can discount the chance of even another FTSE100 company having this problem.

Flying_Scotch_Man

Thanks to all who have given advice on this question. I think the main conclusion is not to have all eggs in one basket. There will be many other areas of the economy hit when a crash happens since many businesses have emerged due to the housing boom and I suppose it will be difficult to avoid being affected in some way or another. On the other hand where there is a sea change in the economy new oppertunities will arrive, although spotting them is a trick I still have to learn.