Shock, horror:
...HBOS has come out with a warning that bad debt provisions for the current year will top around £8 billion which is nearly half of the £15.5 billion of emergency capital raised earlier this year.
*sigh*
1. About a fifth of UK residential mortgages are with HBOS and I estimate the total losses to UK banks thereon at £40 billion, a fifth of £40 billion is £8 billion.
2. These are provisions, not actual losses, which may turn out to be a bit more, or indeed less. Then you can add on stuff for lending to businesses and investments in US sub-prime rubbish and so on.
3. It's hardly headline news if they end up losing all their emergency capital - that's why they raised it, n'est-ce pas? Seeing how difficult/expensive this is, you'd expect them to raise just enough to cover their losses, so it's reasonable to expect them to actually lose it all as well.
*/sigh*
Saturday, 20 December 2008
Does this surprise anybody?
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4 comments:
Trouble is the money we have lent to them they have had to lend back to the government by buying Gilts to increase their capital base. Soooo...they have no money to lend to customers....
Why am I losing the will to live again?
L, I read about that, it is so maddening it is beyond belief.
A bank's "capital" is merely a balancing figure of total assets minus provisions minus liabilities. For Companies Act purposes it is split up into share capital, share premium, revaluation reserve, retained profits etc but that is highly artificial.
So lending banks money and forcing them to lend it back to the government (by buying gilts) does not change their "capital" by one penny. And charging them high interest rates on what they borrow and paying lower rates on what they lend back ultimately worsens it.
Further, simultaneously increasing banks' assets AND liabilities also worsens their "capital" ratio, because it's the same number divided by a bigger number.
Remind me, who elected them?
Can you kindly explain why you should expect to lose emergency capital. can not such capital just be insurance against hostile events yet to be?
Anon, I explained, raising emergency capital is expensive and humiliating, you would not raise a penny more than you thought you needed.
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