Wednesday, October 24, 2007

BOE Says Banks Vulnerable to `Shocks' After Credit Collapse

Looks like the BOE ( and other central banks) will have do to some more bailouts like they did with Northern Rock..... Should be no problem in times when their credibilty is no longer vulnerable ( already gone) .... ;-)

Sieht ganz so aus als wenn die BOE ( und andere Notenbanken weltweit ) zukünftig noch weitere Bailouts wie bei Northern Rock befürchten muß.... Nachdem die Glaubwürdigkeit eh schon arg angekratzt und kaum noch vorhanden dürfte das nicht weiter schwierig werden..... ;-)

BOE Says Banks Vulnerable to `Shocks' After Credit Collapse
Oct. 25 (Bloomberg) -- The Bank of England said the global financial system is at risk of further instability because of ``ongoing uncertainties'' about credit-market losses.

The central bank said in its financial stability report today that markets are now more susceptible to a potential slump in global stocks, a slide in the dollar or a crash in U.K. commercial property after the U.S. subprime mortgage collapse. Merrill Lynch & Co. yesterday reported the biggest quarterly loss in its 93-year history after $8.4 billion of writedowns.


> I highly recommend to read The Role of CDOs in Merrill's Losses (Updated and Expanded Version) from Naked Capitalism

> Kann dazu jedem The Role of CDOs in Merrill's Losses (Updated and Expanded Version) von Naked Capitalism ans Herz legen

``Financial systems in advanced economies are vulnerable to further shocks, either in credit markets or from new sources,'' the Bank of England said in its semiannual report.

Investors are assessing the fallout from a credit-market rout that led to a surge in borrowing costs and a run on the deposits of U.K. mortgage lender Northern Rock Plc. Today's report said British banks are still hoarding cash to protect their balance sheets, which may keep credit conditions ``tight'' into next year and make it harder for some borrowers to manage debt.

While the central bank said ``there have been signs of recovery'' in money markets, the interest rate that banks charge each other for three-month loans hasn't returned to the level before credit costs surged on Aug. 9. The London interbank offered rate, which was 6.05 percent at the start of August, was 6.28 percent yesterday. It touched a nine-year high of 6.9 percent on Sept. 11.

Crisis Management
In a worst-case scenario, U.K. banks would have to raise as much as 170 billion pounds ($348 billion) if market conditions prevented them from selling the loans on their balance sheets to other investors, the central bank said.

The Bank of England, which had been criticized for not doing enough to help lenders after markets seized up, also said U.K. authorities need to ``strengthen their crisis management arrangements.'' Lawmakers will question Chancellor of the Exchequer Alistair Darling on the U.K. government's role in the affair at 11 a.m. in London today.

``Some important lessons need to be learned by both financial institutions and authorities,'' Bank of England Deputy Governor said John Gieve in a statement. His handling of the Northern Rock crisis was singled out for criticism by members of Parliament last month.

Highlighting the risks to global financial stability, the Bank of England said a slump in U.S. economic growth may spark a further drop in ``asset prices'' that ``could trigger a sharp decline in the U.S. dollar.''

> They don´t need to point fingers to the US..... It looks like the debt problem is also spreading to UK corporations...... Easy to figure out what will happen when the economy slows and the credit is less plentyful....

> Hier muß man nicht auf die USA zeigen..... Es sieht so aus als wenn die Kreditprobleme in UK so langsam aber sicher auch die angeblich so soliden Firmenbilanzen betreffen.... Unschwer zu erahnen was passieren wird wenn die Konjunktur ernsthaft ins stocken kommt und die Kreditklemme so richtig zum tragen kommt......
Debt Burden
The U.S. currency has declined 8 percent against the pound in the past year and dropped to a 26-year low of $2.0654 on July 24.

The central bank also said a slowdown in world growth may hurt global stocks and that it's concerned about a potential decline in U.K. commercial property prices.

>LOL! I agree that they should worry about commercial property ( see Commercial property "View from the top" / Economist ). But the far bigger problem is the residential market. Just click here and you will see unlike lots of BOE members the white elefant in the room .....I highly recommend to read Oh no, it can't happen here where Alice Cook from The UK Housing Bubble takes on the view of Kate Barker, who sits on the Bank of England's monetary policy committee..... Looks like the BOE members are as smart as the Fed members....

> Schon lustig.... Ich stimme überein das sich der gewerbliche Immobiliensektor zweifelsfrei jenseits von Gut und Böse bewegt (siehe auch Commercial property "View from the top" / Economist) Aber das eigentliche Problem liegt doch eindeutig im privaten genutzten Immobilienmarkt. Um das auf einen Blick zu erkennen braucht man sich nur diese Daten und Fakten vor Augen zu halten. Ich kann jedem raten sich den nachfolgenden Link durchzulesen.Oh no, it can't happen here . Hier betrachtet Alice Cook vom The UK Housing Bubble was Kate Barker, ein Stimmberechtigtes mitglied des Bank of England's monetary policy committee zu diesem Thema zu sagen hat..... Man fragt sich schon welche Voraussetzungen man erfüllen muß um in diesen Ausschuß zu sitzen.....

The burden on British households, which have taken on a record 1.4 trillion pounds of debt, is increasing along with credit costs, the Bank of England said today. First-time buyers of residential property and investors that purchased homes to rent them out to tenants are ``particularly exposed,'' the report said.

Still, U.K. commercial banks' earnings and their capital reserves have helped them cope with the market rout, the bank said. ``Robust'' economic growth ``and the high profitability and capitalization of major U.K. banks provide a strong anchor for the financial system.''

The report also said the market selloff may be welcome because investors were taking too-optimistic a view on the risks facing the global economy.

``A return to earlier conditions would be undesirable as that involved an underpricing of risk,'' the Bank of England said.

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Blogger jmf said...


CMBS troubles will cost private equity


More news of pain for private equity deals in the FT on Thursday, this time for Carlyle Capital, and its $6.3bn takeover of Manor Care, the US Nursing Home operator.

Carlyle is having trouble shifting debt - incurring higher interest charges on $4.6bn of bonds backed by the value of Manor Care’s real estate because spreads on commercial mortgage backed paper have widened sharply in the past few days. Carlyle’s banks may suffer too, since the private equity group earlier negotiated a deal to cap interest costs.

And while one troubled deal does not a trend make, securitizing real estate has been a popular niche for some in the private equity industry - making the CMBS market one to watch.
In the past week alone, CMBS spreads have widened a whole percentage point.....

1:09 AM  
Blogger jmf said...


UK Sept mortgage approvals slows to 52,685 from 61,051 in August - BBA UPDATE


LONDON (Thomson Financial) - Mortgage approvals for house purchases dropped in September, both in number and in value during the month where there was a run on building society Northern Rock, according to figures from a leading group of banks.


In its in-depth analysis of the mortgage market, the British Bankers' Association said the number of mortgage approvals for house purchases dropped to 52,685 in September from 61,051 in August.


The value of mortgage approvals for house purchase also fell, to 8.02 bln bln stg from 9.39 bln in August.


The approval figures -- seen as a gauge of future demand -- suggest that the UK housing market may be starting to slow in response to the Bank of England's five interest rate hikes as well as to the greater uncertainty created by the recent financial market turbulence.


Meanwhile, the BBA confirmed that underlying net mortgage lending slowed to 5.8 bln stg, from 6.1 bln in August, though this is above the recent average of 5.6 bln, leaving annual growth still at around 14 pct.


It also said that gross mortgage lending fell to 18.5 bln stg from 21.0 bln in August.

2:01 AM  
Blogger jmf said...


Ken, We've ALL Had Too Much Investment Bank `Fun': Mark Gilbert

2:14 AM  
Blogger jmf said...


REITs Suffer Biggest Decline Since 1998 as U.S. Rout Deepens

7:20 AM  
Anonymous Anonymous said...

for all the hand-wringing about the $ collapse , I remember when it was $4/1 Sterling in the 1960's vs. 2 now .... not that I'm happy with the last few years drop , but I like to keep things in perspective

8:26 AM  

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