The UK banking crisis

Lloyds TSB: Safe, solvent, straighthforward Retail bank, until it was persuaded to buy HBoS by Economic Jonah, Gordon Brown.
HBoS (Halifax, Bank of Scotland): mainly retail, Large Mortgage Business, which went belly-up and took Lloyds TSB with it too.
Royal Bank of Scotland, very small investment bank, Largest UK retail operation, big Corporate loan book, whose purchase of ING strained its balance sheet to breaking point. It\’s failure was hubris, not Investment banking.
HSBC: Universal Bank, large global retail and investment banking operations, now trading at the same shareprice it was before the crisis, and is still paying dividends.
Barclays: Large UK retail bank, overseas operations, buccaneering and ambitious investment bank, who were raised funds from private investors and just managed to keep out of Government hands.
Standard Chartered: International corporate and retail bank, mainly Asia and Africa – no problem at all.
Northern Rock: Ex Building society turned Mortgage and Retail, bailed out by a Labour government because they couldn\’t bear to see anyone make money and wanted to save jobs in key marginals.
Bradford & Bingley: See Northern Rock. Eventually bought by Spanish banking group, Santander.

Hmm, yes, it was all about investment banks, bonuses and neo-liberals deregulating the casino gambling of the futures and derivatives markets, wasn\’t it?

Thus the solution will be in limiting the futures and derivatives markets, clamping down on bonuses and restricting the activities of the investment banks.

Yes, I see it now.

8 thoughts on “The UK banking crisis”

  1. it’s a bit mind-bending isn’t it … absolutely everybody is saying Bob Diamond = “casino banking” which is a) a great example of Chris Dillowesque fetishism of individuals/leaders and b) somewhat ignoring that fact that “investment banking” had very little to do with the crisis *

    * unless you count keeping tranches of MBS on your balance sheet as assets as “investment banking”, which I suppose you could.

  2. Or making high-rate commercial loans for stupidly-leveraged PE and commercial property deals (which is actually what got HBOS, not the mortgages). Also, RBS bought ABN, not ING, and they bought it for its i-banking business.

    Not that the wider point doesn’t stand, but it’s nice to have a fact or two if you’re arguing that other people are engaging in fact-free bullshittery.

  3. Yeesh. Just came to you through Obnoxio. Nice article, but you’re wrong. What sunk UK banks wasn’t losses at all. It was exactly what Gordon said it wasn’t. They just ran out of cash. It really was that simple.

    We haven’t seen the kind of losses on UK mortgages that everyone seems to talk about, nor is the bollocks about casino banking, mortgage regulation, distribution or 125% mortgages relevant. What did for Northern Rock, RBS and HBOS was cash. Maybe RBS would have gone eventually anyway as a result of the crap on ABNs books, but we’ll never know.

  4. IIRC Some ran out of cash as they had a business model of on-selling their loans pretty much at principal and earning from arrangement fees. Once they could not sell on, they could not lend any more and so had no more fee income, just the prospect of interest income from those loans and likely, having to pay interest on their borrowings.

    And people talk about banks “printing money” – if they could, they would not have been in that jam. They cannot, they could not and they were.

  5. “Remind me how we got into this mess again?”

    Politicians like housing bubbles, especially just before elections.

  6. “We haven’t seen the kind of losses on UK mortgages that everyone seems to talk about”

    Just you wait ‘enry ‘iggins, just you wait..

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