Northern Rock

More interesting news....r

From the Independent.ie
Government guarantees Deposits for two years

By Dara Doyle and Ian Guider
Tuesday September 30 2008

The Government has said it will guarantee Irish banks' deposits and debts for two years, seeking to calm investor concern after banking shares fell 26 percent in Dublin yesterday.


''The Government has decided to put in place with immediate effect a guarantee arrangement to safeguard all deposits, covered bonds, senior debt and dated subordinated debt,'' the finance ministry said in an e-mailed statement.

The guarantee will last until Sept. 2010 and covers Allied Irish Banks Plc, Bank of Ireland Plc, Anglo Irish Bank Corp. Plc, Irish Life and Permanent Plc, Irish Nationwide Building Society, the Educational Building Society and ''such specific subsidiaries as may be approved by government,'' the ministry said.

Ireland joins governments around the world, which have stepped in to protect banks following the seizure in credit markets. The U.K Government yesterday took control of Bradford & Bingley Plc and Fortis received an 11.2 billion euros ($16.3 billion) injection by the governments of Belgium, the Netherlands and Luxembourg to boost its capital base.

''This is an unbelievably positive move for the Irish banking sector,'' said Kevin McConnell, head of research at Bloxham Stockbrokers in Dublin, in a phone interview. ''It's really exceptional.''

Ireland became the first euro-area economy to slide into a recession, as homebuilding plunged amid a slump in house prices. House prices fell 9.4 percent in July from a year earlier. Bank of Ireland Plc, the country's second-biggest bank, said on Sept. 17 it will slash its dividend by 50 percent and post a drop in first-half profit as loan losses mount.

The guarantee is being provided at a charge to the banks and is subject to ''specific terms and conditions so that the taxpayers' interest can be protected,'' the ministry said. (Bloomberg)
- Dara Doyle and Ian Guider
 
I don't know enough about economics (kicked out of the Political Economy class half way through my first year) to add much of any worth but I wouldn't have minded if the banks had all gone bust and the government rendered all mortgages with those banks null and void, made the banks take the hit and told mortgagees they no longer had to repay the mortgages.

(Now you see why I failed.)
 
Wry comment on a medical website today:

Failing banks get nationalised. Failing hospitals get privatised.
 
Currently doing the rounds in Cheltenham General:

Following the problems with Lehmann Bros and in the sub-prime lending

market in America and the run on Northern Rock, HBOS and Bradford &

Bingley in the UK, uncertainty has now hit Japan.

In the last 7 days Origami Bank has folded, Sumo Bank has gone belly up

and Bonsai Bank announced plans to cut some of its branches.

Yesterday, it was announced that Karaoke Bank is up for sale and will

likely go for a song, while today shares in Kamikaze Bank were suspended

after they nose-dived.

While Samurai Bank is soldiering on following sharp cutbacks, Ninja Bank

is reported to have taken a hit, but they remain in the black.

Furthermore, 500 staff at Karate Bank got the chop and analysts report

that there is something fishy going on at Sushi Bank where it is feared

that staff may get a raw deal

 
Thats a good article but as one of those replying points out it ignores the real impact of mark to market. I'll give an example, just remember that a banks loans are its assets.

If you were a clever little boy saved up and bought a house ,financing,on a prudent basis , with a 60% mortgage. If there is a market downturn you've got plenty of cover before you start to be at risk of losing money. This is good.

Little Johnny Chancer buys a house with a 100% mortgage and has very no cover before he is in negative equity. This is risky.

Under the mark to market rules what happens if nobody buy houses is that there is no price for a house. Therefore the value of both houses to their owner is identical -nil.

If JC is forced to sell his house in a repossesion for say 50% of what had been its value, then the clever boys house is deemed to be worth 50% of its original value to him
A subjective analysis reveals that clever boy is in a better position but objectively the chancer is in exactly the same position.
This extreme example is what is happening to bank assets.
 
If anyone is interested!

We took out a 105% NR mort in 2003 fixed rate for 2yrs
Our monthly payment was £970

I wouldn't recommend what we did but at the time we didn't have a choice,

2005 we remortgaged as the value had gone up & it meant we could get rid of loan that made it over 100%, we ended up with a 85% mort fixed rate 3yrs
Monthly payment £1070

This summer the fixed rate finished & NR were not able to offer a better deal at the time & our monthly payments went up to £1350, thankfull OH wages had gone up & it covered that,

This morning OH contacted NR & we now have another fixed rate for 1yr paying £979 per month

As house prices stand at the moment we have a 60% mort,

It is worth if you have a NR mort to contact them & see if they can help! it saved us nearly £400 in one phone call!

We had a 25yr mort in 2003 & today we have a 15yr
 
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Good to see, Aldaniti. If you don't ask you don't get.

What you also prove is that it is possible for a 105% LTV mortgage to be beneficial for all parties. A good riposte for the emotive calls for all those type of loans to be banned.
 
I think we were lucky TS, 2 or 3 years later & we would have never been in the position we are now in,

We moved into this property in 2000 renting it from my OH's then employer, he purchased it for £110k,
When OH left that company he was told the property was completey different to his employment, funny that less than 8 weeks later we were told they were selling up!
We purchased it for £150k in 2003
When we remortgaged in 2005 it was valued at £200k by NR
We had it valued by local est agents in July £270k!!
Two doors up sold their bungalow last week which is exactly the same as ours but has a slightly smaller garden than ours for £250k
So even with a large drop in prices we shouldn't go into neg Eq but we have no intention of moving from here so as long as we can pay the mort we should be ok, as I said very lucky really
Helen
 
If we haven't gone to far then this could unblock the credit logjam. Here's hoping
From Reuters
The European Commission will propose easing the obligation on banks to value riskier assets at current low prices as part of efforts to stabilise financial markets, an EU document seen by Reuters on Friday said.

EU finance ministers called for the measure on Tuesday to be introduced by the end of this month so that EU-listed banks can apply it to their third quarter results.

The United States has eased the impact of its equivalent fair value or mark-to-market rule for banks and Brussels is keen that their European rivals have the same advantage.

'The Commission now proposes to amend the implementing regulation which endorsed IAS 39,' said the document.

(Reporting by Huw Jones; editing by Mark John and Paul Taylor) Keywords:
 
Surprisiingly the Mail has gone to print on what was obvious a while back, HMG were leaking to Robert Peston of the BCC, (and anyone else that would pay him- allegedly). Unfortunately the leaks, often designed to put put pressure on parties with which HMG was in negotiation, were sensationalised by the BBC and the rest of the media.

It is my view this meant that, without a proper HMG briefing and explanation, the ill informed comments actually exacerbated the whole situation.

http://www.dailymail.co.uk/news/art...-friendships-scoop-shocked-banking-world.html
 
Now its in the open and I'm not spreading doom and gloom the events here were quite clear to see some time ago.

http://business.timesonline.co.uk/t...ectors/banking_and_finance/article4926316.ece

RBS which had not been mentioned as vulnerable stretched itself incredibly to buy a major European Bank at the very peak of the market. It therefore suffers from two sets of losses at the same time that it has used all its ability to attract capital.

HBOS is a different story, here imo the FSA acred without considering the consequences. If you look on the FSA website you will see a list of speeches in 2008. In one the FSA effectively announce that mortgage backed securities should no longer be treated as first class capital in measuring the strength of banks. This was to prevent sub prime assets suddenly appearing in British banks capital.

Guess which bank had the by far the largest proportion of mortgage backed assets in its capital base? Correctomondo- the biggest mortgage lender in the UK, HBOS. Now the HBOS book is one of the most established in the UK and its exposure pattern statistically will not vary wildly from the market profile put out by the BoE. I could be wrong but the average Loan to Value is probably below 70% and the default rate( harder to call) but I'd opt for not much different to 1%. But because the blanket rule change its capital base is suddenly hard hit. It is also unable to sell mortgage backed securities to raise cash because the other banks cannot count them in their first class capital.

I have simplified for the sake of easier understanding but HBOS is in reality not badly placed assuming the BoS part of the business did not go absolutely bonkers to the extent that their madness would already have been clear by now. For example why would they buy Yank mortgages they are one of the biggest suppliers of mortgage assets globally themselves.
 
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In its latest report NR states that its debt to HMG has fallen from £26.9bn. to £11.5bn.. It also stated that
" residential mortgage arrears rose nearly 60 per cent from 1.18 per cent of the total book at the end of June to 1.87 per cent at the end of last month"
Hardly merits the hysteria that arose at the time.
 
Very good news this morning! as the paperwork hadn't been completed at the time of the 1.5% drop it means NR had to recalulate our new mort & instead of paying £979 it has dropped to £891 so we have saved nearer £500 just for the sake of a phone call!
 
Tout Seul, you should apply for the job of finance correspondent for the BBC.

(But of course you wouldn't get it as you don't sensationalise things.)
 
My Mortgage is with them as well. This drop means I`ve taken the opportunity to increase the amount I pay. It`s only gone from £273 to £310 but it`s a start.
 
Yes I heard something on the news this morning that if you pay an extra £40 per month on an average £180k mort you would complete mort two years early & save something like £20k in interest charges, hope I have got that right!
 
Its a good point you make. Aldaniti.
When I took out a mortgage in the 80's interest rates were high.We worked out that we could afford to pay that level of interest throughout the term. Accordingly even though rates went down we kept on paying at the same level. Its not necesarily welcomed by the lender but the never demanded that we reduce our payments. Its quite a nice feeling to see the additional reduction in amount on every annual statement. Also if one to get into difficulty there's quite a moral obligation for the lender to be sympathetic.
 
Thats what weve been doing for a few years now - they dont like it, but it means that if we budget for what we usually pay them, we can not pay so much for a coupld of months (so long as its our proper amount!) and we are only doing a good thing for us.
 
Northern Rock staff to receive bonuses

Great news. I am so pleased for them. I like this idea of a new bonus structure for companies taht make abolsutely no money and have disasterous balance sheets.

Woolworths and land of leather staff can look forward to the same



Good to see the goverment (despite owning the company) are not interfering in anyway with this well deserved largess
 
Seems a little bit harsh, clivex.

The staff at Northern Rock cannot really be held responsible for the lunatic actions of the executive. And presumably not all staff will be receiving bonuses anyway - only the high performers (still possible to have them even in an organisation like NR).

PS. What are you going to do for clobber, once Land of Leather shuts it's doors for good? :whistle:

:D
 
"all the staff" benefit from the taxpayers bailing out. And in fact, the bonuses are across the board


The goverment is clueless...

Their idea of great PR is to cut the VAT rate. Boneheaded

Better PR would have been conditions on the banks.

1. Fire off 25% of all staff immediately with minimum redundancy.

2. Repossess their homes unless they can immediately pay the next ten years mortgage payments in cash within seven days

3. Stiff some of the board by hacking kiddy porn onto their PCs and immediately sending for the Bill. Splash their boats all over the papers

4. Send all staff How to Top Yourself manuals

5. Any staff querying the above to "disappear"

The public would have cheered those initaitives home.
 
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