Is the bank market “broken”, or coping with much smaller capacity and trying to revert back to more prudent times?
The short view here is that thanks to the financial/economic recession here, when many foreign banks/lenders left our shores, we saw numerous domestic bank and building society mergers AND then the collapse of the UK mortgage securitisation market that pre 2007 accounted for around 50% of all UK mortgages - UK BANKING CAPACITY was seriously damaged.
On top of that, UK banks had the E.U. and UK politicians DEMANDING that they shrink their size/balance sheets/lending, PLUS the regulators finally woke up and through classic over reaction, RESTRICTED lending further by insisting banks held more capital, for loans they did not want to make, as being told to shrink. The time for more bank capital, was when bank lending ratios went up from the mid 30’s back in 1997, to the 40’s by September 2007, not when the buggers NEEDED to shrink their activities. D’uh.
Furthermore, having had politicians and ‘the people’ chastise the banks for lending too much when, in theory, the global boom and lower interest rates meant that there was less far risk, the banks were being asked to repeat the process in a far riskier market, during the worst recession in 80-years, with threats of double and triple dips.
There IS STILL a broken financial market, or two, the interbank market is not fully functional to 2007 levels and the previously safe mortgage securitization market, that increased lending capacity by safely allowed banks to get mortgages ‘off balance sheet’ – but I’m not sure what big government can do about that.
New lenders are ALREADY emerging to help lending capacity, lenders coming out of a recession are more confident; splitting existing banks which will then RAISE their costs of reserves/lending will do NOTHING, other than put interest rates up AND put off the new lenders who will wonder what new South American market fix ‘initiatives’ the Labour government from 2015, will have.
Please or to access all these features
Please
or
to access all these features
Politics
Labour & banks; splitting won’t fix capacity.
3 replies
Isitmebut · 17/01/2014 10:06
OP posts:
Please create an account
To comment on this thread you need to create a Mumsnet account.