UK banks and housing market on life support

From The Telegraph:

Nomura analysts in a presentation yesterday, pointed to last month's Bank of England Financial Stability Report [see page 51] as they warned of the funding crunch facing the UK's major banks. While the banks of other major European countries, such as France, Germany and Italy, face their own funding issues next year, none has to refinance anything like the same amount as the UK banks...

"UK banks face significant refinancing requirements over the next few years, as funds raised prior to the credit crisis mature," said Robert Law, co-head of banking research at Nomura, "Lloyds and RBS are undertaking substantial medium-term restructuring of their balance sheets. This target includes targets to reduce assets in nominal terms over five years [i.e. call in as many loans as possible and/or make fewer new loans] In our view, this restructuring is partly aimed at managing their refinancing requirements, as well as reducing wholesale funding an particularly the proportion of short-term financing within that."

... In the FSR the Bank of England admitted that replacing all this funding would be a "substantial challenge", and put the total figure on the amount that UK banks need to refinance by the end of 2012 at between £750bn and £800bn, working out an average monthly fundraising rate for the next two and a half years of more than £25bn. This is double the fund raising rate for the years between 2001 and 2007 of £12bn....

To put those figures in perspective, total UK residential mortgage lending is about £1,200 billion and total loans secured on commercial property are about £250 billion (from memory).

I'll be interested to see what the government does to try and keep the land price bubble inflated. Presumably they will just keep bailing out the banks and so on until the whole economy ends up on life support.

Spotted at Adam Collyer's.