UK News
Insights from the UK and beyond
Too big to fail? Guerrilla central banking and the last resort
Deciding it was safe to come clean because banks are now on a more even keel and the worst of the credit crisis is behind us, the Bank of England has told the nation that at the height of the turmoil it secretly lent Royal Bank of Scotland and HBOS a colossal £62 billion, which is more than the entire British defence budget.
Both banks faced the imminent closure of high street cash machines and the curtailment of normal banking operations across the country.
The Bank said “this was a dire emergency” and Downing Street called the secret lending of taxpayers’ money in the Autumn of 2008 “a powerful reminder of how close the banking system came to near collapse.”
In Westminster, some MPs were flabbergasted, even though the loans have now been repaid.
from The Great Debate UK:
When firms “Too Big to Fail” fall
Amid the turmoil of the 2008 financial crisis a myriad of events unfolded that the general public knew nothing about, writes New York Times reporter Andrew Ross Sorkin in a new book titled "Too Big to Fail."
Wall Street fell from the dizzying heights of good fortune to calamity in a matter of months. To a large degree it's still to early to tell whether financiers and politicians involved made the right choices.
from MacroScope:
“Normal” bank lending is no longer realistic
MacroScope is pleased to post the following from guest blogger James Carrick. Carrick is economist at UK fund firm Legal & General Investment Management. He says here old patterns of lending are unlikely to return and that this means slow growth in developed countries.
"Despite £175 billion of quantitative easing, bank lending in the UK remains weak, threatening to restrain the economic recovery and equity market rally.Â
Banks score own goal with bonus culture defence
In the blink of an eye it look as if the City is “booming” again after Barclays and HSBC announced buoyant investment banking earnings on Monday.
Both banks were hit by a surge in bad debts as the recession took its toll on borrowers, but analysts said that resurgent debt and foreign exchange trading and market share grabbed from troubled rivals fuelled the largely positive results.
from MacroScope:
Show us the money
It says something about the current world that a new economic indicator is about to be unleashed by the Bank of England and it basically tells you whether banks have been doing what they are supposed to do -- lend.
The first Trends in Lending report is due out on April 21 at 0830 GMT. Always nice to have a new indicator, but this one may get a bit more attention than would have been the case a few years ago. It 
is designed to provide up-to-date information about bank lending to households and businesses.
Late payments send small businesses to the wall
By clamping down on credit, Britain’s newly cautious banks are making collapse almost inevitable for many small to medium enterprise (SMEs) who need a financial cushion now, more than ever, as suppliers and customers struggle to pay bills as the economic downturn bites.
Small businesses in Britain, which employ over half of the private sector workforce and annually generate some 3 trillion pounds, typically depend on loans for working capital to tide them over during lean spells.
Can MV=PT solve credit crisis for BoE?
Britain could begin a telling exercise in classical monetary theory on Thursday as the central bank gets set to test a newly minted policy of “quantitative easing”.
In an effort to pump more money into the financial system and encourage banks to get lending again, the Bank of England has been given the green light to basically create more money.
Playing the blame game
President Barack Obama had barely settled into in the White House before he was happy to admit he had “screwed up” over one of his choices for a cabinet job after Tom Daschle withdraw his nomination as health secretary over an income tax controversy.
Even Britain’s leading bankers were moved to apologise to parliament last month over the sector’s indiscretions in the boom years.
Nationalisation: an act of mercy for RBS?
Royal Bank of Scotland’s controversial former Chief Executive Fred Goodwin once memorably referred to the consolidation of smaller British lenders as “mercy killings.”
Goodwin was speaking in 2001, when he could still bask in the glory of RBS’ audacious acquisition of larger rival NatWest the previous year, a deal that set the standard by which all banking takeovers were judged.
Should banks sponsor sports stars?
A bit like asking turkeys to vote for Christmas, parliamentarian John Mann has called on the likes of tennis player Andy Murray, equestrian star Zara Phillips and motor racing great Sir Jackie Stewart to scrap their sponsorship contracts with the Royal Bank of Scotland.
Bleeding red all over its accounts and shedding thousands of jobs, the struggling Scottish bank has been heavily criticised for doling out bonus payments to staff despite receiving billions of pounds of state aid.
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The Wall
