8 banks to be stress tested in regard to a house price crash

antrobus

Bantex wrote: »

I remember Gordon Brown in 2007 banging on about there not being any problem with the banking sector and we were just "talking ourselves" into a recession.

Ah yes, we were entering "an era that history will record as the beginning of a new golden age for the City of London".

Gordon Brown, June 2007

Thrugelmir

AndyGuil wrote: »

They will all pass. The amount of money being loaned on houses is nothing like it used to be pre-recession.

The total debt on the balance sheets of the largest lenders has barely changed since the peak.

AndyGuil

Thrugelmir wrote: »

The total debt on the balance sheets of the largest lenders has barely changed since the peak.

Exactly. They came through the shock following that.

Thrugelmir

AndyGuil wrote: »

Exactly. They came through the shock following that.

With enormous Treasury and BOE support.

SLS, SGS, QE, FLS, HTB, HTB2, plus sizable loans to provide short and long term funding.

NRAM still has some £70 billion of debt that needs to be repaid/refinanced.

Ulster Bank is one of RBS's toxic assets.

A 1% rise in the requirement for tier one capital would cause the major lenders to contract their lending books by around £400 billion. So the banks are still weak in terms of another serious downturn occuring.

AndyGuil

Thrugelmir wrote: »

With enormous Treasury and BOE support.

SLS, SGS, QE, FLS, HTB, HTB2, plus sizable loans to provide short and long term funding.

NRAM still has some £70 billion of debt that needs to be repaid/refinanced.

Ulster Bank is one of RBS's toxic assets.

A 1% rise in the requirement for tier one capital would cause the major lenders to contract their lending books by around £400 billion. So the banks are still weak in terms of another serious downturn occuring.

Most of those are to get the market going and help people access funds.

Generali

michaels wrote: »

That would be a first, in the past bank stress tests have been based on what the banks were likely to pass rather than the risks they were exposed to.....

Cretian banks passed stress tests mere months before going bust. Greek banks were tested on the basis that they'd suffer no losses from Sovereign debt when Greek bonds were yielding 20 & 30%!

It's like stress testing a marathon runner by asking them to pop upstairs to get your slippers.

Thrugelmir

AndyGuil wrote: »

Most of those are to get the market going and help people access funds.

What market going? The majority were to prop the banks up in the absence of wholesale funding. Banks are delveraging and in the longer term will be shrinking.

AndyGuil

Thrugelmir wrote: »

What market going? The majority were to prop the banks up in the absence of wholesale funding. Banks are delveraging and in the longer term will be shrinking.

"What market" was the precise problem that these addressed. It dried up. The banks are in no worse position and arguably a better position than the peak. They have passed "stress tests" since then and will do here. I think it is more of a demonstration or statement than a test.

Thrugelmir

AndyGuil wrote: »

The banks are in no worse position and arguably a better position than the peak

You've lost me now. RBS is shortly going to unveil a £7 to £8 billion loss.

There's a raft of fines heading down on the banks yet as yet more insider trading is being uncovered.

Barclays financials results today were pretty clear as to the direction of travel.

Banking is well past it's peak. At it's peak retail banking in the UK was subidised by cross selling of PPI. Strip that out and banks weren't anywhere as near as profitable as it then appeared.

AndyGuil

Despite this the banks have survived and continued with strong credit ratings. This stress test will show very little.