Comments on: Bank Nationalisation must follow failure to meet stress test for solvency

By: Dave Hough

Dave Hough — Sun, 08 Mar 2009 22:04:45 +0000

i thnk this sums it up nicely…

“If the debtor is in difficulty, grant him time till it is easy for him to repay. But if ye remit it by way of charity, that is best for you if ye only knew”

(Qur’an 2:280)

By: Stimulate the UK Economy - Business Forum - UK Business Labs

Stimulate the UK Economy - Business Forum - UK Business Labs — Sun, 08 Mar 2009 16:06:38 +0000

[...] mortgage advances, eg make direct capital repayments to the mortgageholders account." Full article can be found here Best wishes, __________________ Aron Stevenson var addthis_pub = [...]

By: Risk of bank default is back to Sept 08 / Lehman failure levels « The Bankwatch

Thu, 05 Mar 2009 04:51:24 +0000

[...] inappropriate methodology of use of government (US, Canada, UK and European) funds. It points to nationalisation as one alternative option to the current use of [...]

By: Colin

Colin — Thu, 05 Mar 2009 01:28:14 +0000

Thanks Dave. I think your observations are dead on. The final point about paying down mortgages directly is interesting because it ensures benefit goes direct to the problem. It also fits with Niall Fergusons ‘jubilee’ concept whereby debt is forgiven every 50 – 100 years just to sort things out. There has been a regular history of Jubilee.

PS .. yes odd hours.

By: dave hough

dave hough — Wed, 04 Mar 2009 20:13:41 +0000

as rightly discussed , solvency and liquidity is the only acid test ( apologies for the pun) – banks will need to be brought “inhouse” and may have to restructure their porfolios to ensure liquidity and thus solvency can be met. capital should have been the last stop loss. The only place a swingline liquidity facility can come from is through nationalisation in the current climate

This may mean more in nationalisation more matching or aligning of both asset and liability portfoios, for example, savings and chacking accounts (liability balances) being behaviourally matched to similar behavioural assets, for example revolving credit lines, and short term unsecured debt. There will still be aliquidity gap.

Mortgages (assets) need to be matched with long term liabilities, and therein there is a problem, finding 3-7 yr liabilities or funds to fund long term, in the current climate, the synthetic means are now largely non marketable other than through covered bonds.

The only other way out i see in the current climate is for governements to directly paydown x % of outstanding mortgage advances, eg make direct capital repayments to the mortgageholders account, it eases the pain of the borrower, improving customer sentiment and liquidity, it also means government funds can be tracked and audited. Paying down mortgage accounts , injects liquidity into banks, reduces write offs, and changes EAD and recovery rates, reduces WRA’s and doesnt errode bank capital, it also directly increases bank capital ratios,

ps were you really writing your post at 03:54!