Stress testing of banks

Generali

wotsthat wrote: »

Odd. It wasn't that long ago you were starting a thread each time petrol went up by a penny a litre.

Have you found the falling oil price stressful? I haven't.

It would be like stress testing how people would cope in the event of a pay rise.

The falling oil price is probably less fun if you've lent a load of money to a oil service company. It wouldn't surprise me at all if HBOS or RBS or Clydesdale were up to their necks in that sort of lending. Someone is financing small oilies.

A while back we discovered that one bank is financing the entire payday lending industry in Aus. The Chairman was appalled when we told him.

wotsthat

Generali wrote: »

The falling oil price is probably less fun if you've lent a load of money to a oil service company. It wouldn't surprise me at all if HBOS or RBS or Clydesdale were up to their necks in that sort of lending. Someone is financing small oilies.

There was a similar discussion a while back. If high oil prices can wreak havoc on economies and low oil prices can wreak havoc on lenders and therefore economies what's the sweet spot?

It's just that some have found $120 to be bad news and, the same people, also find $40 to be bad news and didn't seem to mention when it was just about right.

I'd suggest oil is getting to be more trouble than it's worth. It's really not helped that oil producers have been spending with gay abandon thinking $100 oil was forever and completely unprepared for the end of the oil age.

Generali

wotsthat wrote: »

There was a similar discussion a while back. If high oil prices can wreak havoc on economies and low oil prices can wreak havoc on lenders and therefore economies what's the sweet spot?

It's just that some have found $120 to be bad news and, the same people, also find $40 to be bad news and didn't seem to mention when it was just about right.

I'd suggest oil is getting to be more trouble than it's worth. It's really not helped that oil producers have been spending with gay abandon thinking $100 oil was forever and completely unprepared for the end of the oil age.

I guess high and low oil prices cause different problems for different people. Overall, I would be extremely surprised if low oil prices were anything other than a strong net positive for the UK's economy. An independent Scotland would feel very differently as oil revenues would be a sizeable chunk of tax revenues both directly and indirectly (via income and corporation taxes for example).

Ignoring the climate change thing, low oil prices are a huge benefit to the world's economy.

Thrugelmir

antrobus wrote: »

That's the instability that the BoE are talking about. Cash poor but asset rich BTL investors all trying to realise equity from asset sales at the same time.

I would say not. The Wilsons were buying from the late 80's I believe. The newbies are a different case , more than likely not so switched on either. Remember the Wilsons were maths teachers. More than likely financially astute as a consequence. Whereas many investors are happy providing the rent covers the mortgage. No attempt to plan for "what if" scenarios. As crap does happen to someone everyday. Working on the assumption it can only happen to someone else is often where matters go wrong.

mwpt

wotsthat wrote: »

For all the chat about the Wilsons there's actually very little in the way of real financial information about them in the public domain. Mr. Wilson seems to court media attention but is somewhat coy about releasing data that would allow us to ascertain his position in 2008 or today.

I believe he himself said that the only reason his business was saved was the slashed base rate allowing most of his mortgage repayments to fall. I thought - though could be wrong - that this wasn't much in dispute. Like I said, if BTL investors are remortgaging each time to finance the next property and expanding so quickly, they have a large set of assets always set at peak prices and probably, if they can get away with it, even overvaluing the assets in order to borrow more. Risky.

Someone is clearly worried about the consequences of a sectoral imbalance focusing on BTL lending. They're doing something about it.

Graham_Devon

wotsthat wrote: »

It's just that some have found $120 to be bad news and, the same people, also find $40 to be bad news and didn't seem to mention when it was just about right.

You are clearly having a pop at me here.

I've not said $40 a barrel is bad news. All I've done is stated what the stress tests were based on.

You've then extrapolated that to....yet again....make an issue out of something that was never there.

Thrugelmir

wotsthat wrote: »

For all the chat about the Wilsons there's actually very little in the way of real financial information about them in the public domain. Mr. Wilson seems to court media attention but is somewhat coy about releasing data that would allow us to ascertain his position in 2008 or today.

He's just the pantomime BTL owner the media turn to because the vast majority of BTL owners have no interest in being celebrities and the BTL model is actually very very boring.

Timing is the key. Some people are lucky enough to get it right. That's life. Though to be fair to the Wilsons you need to take the chance (risk) in the first place.

wotsthat

mwpt wrote: »

I believe he himself said that the only reason his business was saved was the slashed base rate allowing most of his mortgage repayments to fall. I thought - though could be wrong - that this wasn't much in dispute. Like I said, if BTL investors are remortgaging each time to finance the next property and expanding so quickly, they have a large set of assets always set at peak prices and probably, if they can get away with it, even overvaluing the assets in order to borrow more. Risky.

Someone is clearly worried about the consequences of a sectoral imbalance focusing on BTL lending. They're doing something about it.

He talks quite a lot of rubbish so I don't anything he says at face value. I'd love to see some real numbers.

Yes, it seems like a high risk approach but it's only a letting business. Higher deposits will reduce risk but I doubt it'll ever be enough for some.

wotsthat

Thrugelmir wrote: »

Timing is the key. Some people are lucky enough to get it right. That's life. Though to be fair to the Wilsons you need to take the chance (risk) in the first place.

They probably realised too that the risk reduces with time. It's always the new entrants facing the biggest risks.

antrobus

Thrugelmir wrote: »

I would say not. The Wilsons were buying from the late 80's I believe. The newbies are a different case , more than likely not so switched on either. Remember the Wilsons were maths teachers. More than likely financially astute as a consequence. Whereas many investors are happy providing the rent covers the mortgage. No attempt to plan for "what if" scenarios. As crap does happen to someone everyday. Working on the assumption it can only happen to someone else is often where matters go wrong.

I don't believe that the BOE specifically has the Wilsons in mind when it is considering these things.