![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
Bankers (rhyming slang)
Apr. 18th, 2008 06:53 amAnd so Royal Bank of Scotland (owner of NatWest) is going to be forced to break ranks and admit that it needs to shore up its capital base. A £5bn rights issue is just part of the fun. Expect at least as much again in some for of hybrid securitization and more senior debt. Not for nothing were its shares yielding 9% yesterday. They ain’t gonna be yielding that no more.
Personally, if RBS were a customer seeking a mortgage and I were a bank, the conversation between me and Sir Fred Goodwin, RBS chairman, would go something along the lines of ...
“So, Sir Fred, you want to raise £5bn from us, without very much as collateral, because you went out and splurged money on ABN Amro and you lent money to a mate of yours in the pub who was always a bit dodgy, but he promised that he would pay you back and offered you a caravan as security?”
“Yes, that’s right.”
“Thank you, Sir Fred, but I think I’ll pass on this one. Don’t you know that there’s a credit crisis? We are only dealing with reliable borrowers with a good track record. In other words, like banks, we are only willing to lend to institutions who don’t need it. Close the door on the way out, won’t you?”
Halifax Bank of Scotland will likely be next in line, I guess, perhaps followed by Lloyds TSB and Barclays. HSBC is beginning to look an oasis in a desert of crap financial institutions.
The Bank of England, ever keen to bail out these incompetent basket cases, is apparently willing to accept as much as £30bn in collateral in the form of mortgages. However, if RBS needs to raise £12bn, the question must be, is even that much enough? And that, you should note, already constitutes nearly a thousand quid for every adult in the country. I wouldn’t mind so much if the banks had stepped up to the plate to help Citizen UK in the tough times of the early 1990s, but, as far as I recall, they were too busy wallowing in their bonuses.
The banks, I would think, will try to put a positive spin on this, along the lines of “before today we just didn’t know what the impact was going to be, but now things are becoming clearer and it’s possible to draw a line under the whole affair”. All of this sidesteps the fact that the UK banks have steadfastly insisted in past months that they do not need to raise fresh capital. That line has been exposed as, quite simply, a lie. And it isn’t really ameliorated by the fact that anyone who could see what was happening in the US knew that it was a lie. Sir Fred Goodwin was also the guy who said at last year that the takeover of ABN Amro was a good idea. I think I wrote at the time that this was probably one battle that Fortis would eventually be happy to have lost. That's been proved true even sooner than I anticipated.
If Goodwin doesn’t fall on his sword soon, he will do so in the medium term after some of the fuss has died down, but Goodwin isn’t solely at fault here – it’s corporate complacency at RBS, Lloyds TSB and Barclays that will have caused the problems. They have people who are just money brokers who thought that they understood risk. Brokers don’t understand risk – it’s traders and underwriters who understand risk. The bankers, in other words, thought that they were better at their job than they really were, and they didn’t really understand what their job was anyway.
_____________
Personally, if RBS were a customer seeking a mortgage and I were a bank, the conversation between me and Sir Fred Goodwin, RBS chairman, would go something along the lines of ...
“So, Sir Fred, you want to raise £5bn from us, without very much as collateral, because you went out and splurged money on ABN Amro and you lent money to a mate of yours in the pub who was always a bit dodgy, but he promised that he would pay you back and offered you a caravan as security?”
“Yes, that’s right.”
“Thank you, Sir Fred, but I think I’ll pass on this one. Don’t you know that there’s a credit crisis? We are only dealing with reliable borrowers with a good track record. In other words, like banks, we are only willing to lend to institutions who don’t need it. Close the door on the way out, won’t you?”
Halifax Bank of Scotland will likely be next in line, I guess, perhaps followed by Lloyds TSB and Barclays. HSBC is beginning to look an oasis in a desert of crap financial institutions.
The Bank of England, ever keen to bail out these incompetent basket cases, is apparently willing to accept as much as £30bn in collateral in the form of mortgages. However, if RBS needs to raise £12bn, the question must be, is even that much enough? And that, you should note, already constitutes nearly a thousand quid for every adult in the country. I wouldn’t mind so much if the banks had stepped up to the plate to help Citizen UK in the tough times of the early 1990s, but, as far as I recall, they were too busy wallowing in their bonuses.
The banks, I would think, will try to put a positive spin on this, along the lines of “before today we just didn’t know what the impact was going to be, but now things are becoming clearer and it’s possible to draw a line under the whole affair”. All of this sidesteps the fact that the UK banks have steadfastly insisted in past months that they do not need to raise fresh capital. That line has been exposed as, quite simply, a lie. And it isn’t really ameliorated by the fact that anyone who could see what was happening in the US knew that it was a lie. Sir Fred Goodwin was also the guy who said at last year that the takeover of ABN Amro was a good idea. I think I wrote at the time that this was probably one battle that Fortis would eventually be happy to have lost. That's been proved true even sooner than I anticipated.
If Goodwin doesn’t fall on his sword soon, he will do so in the medium term after some of the fuss has died down, but Goodwin isn’t solely at fault here – it’s corporate complacency at RBS, Lloyds TSB and Barclays that will have caused the problems. They have people who are just money brokers who thought that they understood risk. Brokers don’t understand risk – it’s traders and underwriters who understand risk. The bankers, in other words, thought that they were better at their job than they really were, and they didn’t really understand what their job was anyway.
_____________
