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Banking Crisis - Bear Stearns (US's Northern Rock Scenario) impact on UK
UK007BullDog
Posts: 2,607 Forumite
I was wondering what the motive was for A&L offering a 10% ISA and other high savings accounts and thought that they are desperate for peoples savings as they are desperately short of cash http://www.alliance-leicester.co.uk/savings/index.asp?page=home&ct=primarymenu
With the bank crash in the US in the last 2 days involving Bear Stearns
details here http://www.thisislondon.co.uk/standard/article-23454868-details/Crisis+rocks+major+banks/article.do I think we are in for a very rocky ride here in the UK. The 4 major banks involved are A&L, Barclays, HBoS & RBS.
This is a quote I pulled from another site but cannot find the link anymore:
Credit crisis rocks world's major banks
Simon English, Evening Standard
14 March 2008, 6:13pm
The world banking system was plunged into fresh crisis today as one of America's biggest banks teetered on the verge of collapse.
Wall Street giant Bear Stearns admitted it could go bust despite emergency government funding — prompting panic in stock markets around the world.
Wall Street shares plunged and the $20bn (£9.8bn) value of Bear Stearns was halved in seconds.
The Dow Jones index was down 210.85 at 11,934.9 by 6pm, British time.
Analysts said they feared every bank — including Britain's High Street Big Four — were now at risk because of the credit crunch. HBoS lost more than 5% of its value in an hour.
Barclays was down 4% and the Royal Bank of Scotland was down 3%. Analyst Manoj Ladwa of Trad Index said because Bear was so large 'confidence is severely dented and no bank is safe'.
The US bank today said even overnight emergency funding might not be enough to keep it afloat. Other banks refused to lend money in a repeat of the problem that brought down Northern Rock.
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UK traders told stop dealing with Bear Reuters Saturday 15 March 2008 02:02
LONDON (Reuters) - Financial market traders across London have been told by their firms to stop dealing with Bear Stearns, while dealers in New York scaled back their transactions with the ailing investment bank, sources in several dealing rooms said on Friday. At least six major institutions in London -- including Commerzbank <CBKG.DE>, Royal Bank of Scotland <RBS.L> and JPMorgan <JPM.N> -- had stopped giving prices to the U.S. bank, a credit trader at one European institution in London, who declined to be identified, told Reuters.
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ALL YOU MONEYSAVERS. LETS DISCUSS THIS. WHAT ARE YOUR VIEWS?
(Please more than just a one liner like "house price crash coming".... I know it will be hard not to but lets have an proper discussion on this how it will affect the future in the next few years in the mortgage sector). THANKS!
With the bank crash in the US in the last 2 days involving Bear Stearns
details here http://www.thisislondon.co.uk/standard/article-23454868-details/Crisis+rocks+major+banks/article.do I think we are in for a very rocky ride here in the UK. The 4 major banks involved are A&L, Barclays, HBoS & RBS.
This is a quote I pulled from another site but cannot find the link anymore:
Credit crisis rocks world's major banks
Simon English, Evening Standard
14 March 2008, 6:13pm
The world banking system was plunged into fresh crisis today as one of America's biggest banks teetered on the verge of collapse.
Wall Street giant Bear Stearns admitted it could go bust despite emergency government funding — prompting panic in stock markets around the world.
Wall Street shares plunged and the $20bn (£9.8bn) value of Bear Stearns was halved in seconds.
The Dow Jones index was down 210.85 at 11,934.9 by 6pm, British time.
Analysts said they feared every bank — including Britain's High Street Big Four — were now at risk because of the credit crunch. HBoS lost more than 5% of its value in an hour.
Barclays was down 4% and the Royal Bank of Scotland was down 3%. Analyst Manoj Ladwa of Trad Index said because Bear was so large 'confidence is severely dented and no bank is safe'.
The US bank today said even overnight emergency funding might not be enough to keep it afloat. Other banks refused to lend money in a repeat of the problem that brought down Northern Rock.
********************************
UK traders told stop dealing with Bear Reuters Saturday 15 March 2008 02:02
LONDON (Reuters) - Financial market traders across London have been told by their firms to stop dealing with Bear Stearns, while dealers in New York scaled back their transactions with the ailing investment bank, sources in several dealing rooms said on Friday. At least six major institutions in London -- including Commerzbank <CBKG.DE>, Royal Bank of Scotland <RBS.L> and JPMorgan <JPM.N> -- had stopped giving prices to the U.S. bank, a credit trader at one European institution in London, who declined to be identified, told Reuters.
******************************************
ALL YOU MONEYSAVERS. LETS DISCUSS THIS. WHAT ARE YOUR VIEWS?
(Please more than just a one liner like "house price crash coming".... I know it will be hard not to but lets have an proper discussion on this how it will affect the future in the next few years in the mortgage sector). THANKS!
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Comments
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It does look similar in some ways to NRK. BS had apparently a much bigger exposure to the money markets and mortgage backed securities than its peers, and thus when rumours went round about it (especially following the collapse of the Carlyle hedge fund) and other banks cut off credit, it was forced into the arms of the Fed as lender of last resort.
Of course it's not a commercial bank with savers' deposits (that's why the bailout had to go via JPMorgan) so there isn't the danger of a bank run and panic in the streets as with NRK.So the immediate crisis is still in the wholesale markets , rather than affecting Joe Public.
UK banks are not thought to be anything like as exposed to US mortgage backed securities as the American banks.Trying to keep it simple...
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70 views, no comments? 0
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It's a bit early to call the impact on the market - the driver behind the dry up of credit to the bank seems to be rumour and innuendo, assisted by the collapse of a hedge fund that specialised in debt earlier in the week. At least one of the banks in your quote, RBS is apparently already considering a bid for the bank, so the situation may not be as dire as it seems.
We need to see on Monday whether the UK banks will become even more cautious about lending money to each other in the wake of this - despite the $200billion made available to the markets by the central banks earlier this week.
Here's one person who isn't going to be happy though:
" British financier Joseph Lewis, the company's top individual shareholder, spent an average of $107.31 a share - or $1.1 billion - to buy 9.4% of Bear' outstanding shares last year. That stake is now worth less than $370 million."0 -
Just read about it in the FT - there have to be others out there... Bear had $12bn of capital and a balance sheet of $400bn - they had a lot of short term financing.
Immediately below that was an article headed: "lenders pull out of mortgage deals as market volatility worsens" - sometimes at less than an hour's notice (Scottish Widows).
I'm glad to have just agreed a 10 year mortgage with First Direct, as I'm sure it will get more difficult out there. The days of cheap money are over, at least until there's a lot more confidence. The problem is that as the cost of money increases, more people default, therefore the risk rises, and market confidence decreases further...0 -
Bulldog? Why the sudden panic? This will not be the only bank to need great help. The bank of china was removed off their stock market a month ago. They lost around 52Billion US dollars.
This kind of problem will occur for at least 2 years or less. The problem they have is that every bank is keeping hold of their cash and not borrowing through the interbank. This is causing small companies or companies who rely on the interbank to suffer. If they were'nt greedy no one would have fallen to such a problem.
Would you borrow money for a mortgage to someone who does not earn an income and who collects benefits? e.g. NR?Motto: 'If you don't ask, you don't get!!'
Remember to say thank you to people who help you out!
Also, thank you to people who help me out.0 -
cruuuunch!0
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UK007BullDog wrote: »70 views, no comments?
Most people on here arn't bothered and don't understand the deeper credit crunch and banking crisis.
If they took the time to read up then they will soon realise the property bubble in this country is toast and people will get their fingers burnt in the process.0 -
I am not panicked, just want to get a good discussion going. As there is nothing but rubbish and repeats for the up-teenth time on TV......0
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Perhaps, but more importantly are the days of being able to borrow over? I can remember trying desparately to get my first mortgage, it wasnt the interest rate that was the problem, but getting Building Societies to lend anything at all. Back then the banks were not into mortgage lending and societies only lent out what savers had put in. So if you applied for a mortgage near the end of the month, they had already loaned their allocationiwassomeoneelse wrote: »Just read about it in the FT - there have to be others out there... Bear had $12bn of capital and a balance sheet of $400bn - they had a lot of short term financing.
Immediately below that was an article headed: "lenders pull out of mortgage deals as market volatility worsens" - sometimes at less than an hour's notice (Scottish Widows).
I'm glad to have just agreed a 10 year mortgage with First Direct, as I'm sure it will get more difficult out there. The days of cheap money are over, at least until there's a lot more confidence. The problem is that as the cost of money increases, more people default, therefore the risk rises, and market confidence decreases further...[strike]Debt @ LBM 04/07 £14,804[/strike]01/08 [strike]£10,472[/strike]now debt free:j
Target: Stay debt free0 -
I think the Americans are heading for a recession and the UK will quickly follow.
I am feeling a severe impact on my business already due to the credit crunch and I know a lot of brokers, who are all more or less in the same boat (some much worse than others). As Conrad said at the moment there is a massive cull happening in the financial markets and only the strongest and most determined will survive.
We are seeing significant reductions in house prices in my region already. I think we will continue to see this for at least 2-3 years ahead - It might be a bit idealistic but the olympics may well help bail us out a bit in 2012 as property in the south east and london should increase slightly at that time...I am a Mortgage Adviser
You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0
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