uk.finance

>>>> "Virgils Ghost" wrote
>>>>> No surprises there, what's their loan to deposit ratio, 328%?
>>>>
>>> "Tim" wrote
>>>> It was actually a good job that the ratio was that high when
>>>> the "run" happened around the weekend -- with around a
>>>> tenth of all deposits being withdrawn, if the ratio had been
>>>> closer to 100% (with the same level of loans) then a
>>>> lot more than £2billion would have been withdrawn!!
>>>
>> "Virgils Ghost" wrote
>>> Err, if their capital adequacy ratios were 100% then
>>> they wouldn't have needed any external funding,
>>> hence no crisis and no resulting run on the bank.
>>
> "Tim" wrote
>> Yes, I know. But that doesn't stop it helping after the run started!
>
"Virgils Ghost" wrote
> I don't follow your logic, if they were fully funded
> by deposits then there would be no need for any
> form of external funding, whether it be the interbank
> markets or panic inducing BoE credit lines.

Yes, but that might not stop the irrational public creating
a "run" for *another* reason. For instance, a malicious
false rumour that is spread by a disgruntled customer,
but is believed by all the other irrational muppets...

> "Tim" wrote
>> With the general public having now shown that their actions
>> can be quite irrational, creating a run on a bank even when
>> their deposits were still safe, it appears that any solvent bank
>> might be affected by this irrationality of the general public.
>> Who knows what might cause them to do it next time?
>
"Virgils Ghost" wrote
> Not at all, we've gone over this before, the public were
> entirely rational in asking for their money back, their savings
> were not 'safe' until the taxpayer stepped in as a full guarantor...

*No* bank was fully safe before anyway; so what?
That new promise gave an even better guarantee than any
bank had previously. If it was rational for depositors to
withdraw all their money without a guarantee that strong,
then everyone should have withdrawn *all* money from *all*
banks beforehand. But that's just silly, so your argument fails.

"Virgils Ghost" wrote
> ... especially once the run had started, the FSA scheme
> only fully guarantees the first £2k then only 90% of the next
> £33k, and nothing beyond that point. Furthermore, in the
> case insolvency it takes months for the FSA to pay out.

That's all irrelevant - the BoE was already providing NR
with the "facility" required, *before* the run occurred,
so FSCS compensation and insolvency are red herrings.

"Virgils Ghost" wrote
> Take the examples cited in the press, one lady with £750k deposited,
> a couple holding £1m with them and countless others in the six digit
> range, the old FSA deposit guarantee meant nothing to them...

That applied *equally* to all of the banks!
Those muppets shouldn't have kept all that money in just one
bank (be it NR or HSBC or RBS or LloydsTSB or RBS),
if they were worried about the FSCS compensation rules.

"Virgils Ghost" wrote
> ... The depositors had nothing to gain by staying with NR, but
> many potentially nasty downsides to worry about, no matter how
> remote a complete may seem why gamble with upwards of 10%
> of your savings when you can simply move to another bank?

Exactly. They should have had those large sums split across
multiple banks in the first place, ideally each below £35K, then
the FSCS limit wouldn't have been such an issue. But those
irrational muppets had put all their money in *one* bank!

"Virgils Ghost" wrote
> The commercial paper, mortgage backed securities and
> interbank markets would not lend to NR at any price, ...

Ah, but the BoE *would*!

"Virgils Ghost" wrote
> ... why the hell should retail customers trust them when all of the
> largest banks in the country wouldn't touch them with a barge
> pole? The public were acting no more 'irrationally' than the City.

Yes, they were *both* acting irrationally.

"Virgils Ghost" wrote
> Many people have decided to desert NR simply
> because they disapprove of their mupperty, ...

You mean, they are deserting because they are ignorant!

"Virgils Ghost" wrote
> ... can you really trust an organisation that gets itself
> into such a reckless mess in the first place? ...

There was no mess. They are solvent,
with good quality loans on their books.

"Virgils Ghost" wrote
> ... Can you believe in the assurances of an FSA
> with such lax oversight of basic capital adequacy?

What do you mean?

"Virgils Ghost" wrote
> It's a fucking mess from start to finish, and it's not over
> yet, HM Treasury announced this morning that *new*
> depositors are not 100% guaranteed by the government, so
> we're back to the old FSA scheme that precipitated this mess.

Hehehe. All those muppets that withdrew their money from
NR, and are now becoming "new depositors" at another bank,
will be less 'safe' than depositors who stayed at NR! :-))