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Well, yes, of course

Safer banks ‘mean Britain pays more to borrow’
Rules brought in after financial crisis hobble the financial markets and increase bond yields, say traders

Obviously. If banks must hold more capital against any particular position then interest rates will be higher because banks must hold more capital against any particular position.

There are no solutions, only trade offs.

What the hell else did anyone think was going to happen? And why does anyone think that the system required zero capital to be held against government bonds before the crash? If it wasn’t to reduce the interest that governments must pay for borrowing that is?

15 thoughts on “Well, yes, of course”

  1. Again, please forgive my ignorance of finance, but wasn’t part of QE to cover the banks when they decided to (told to – ‘Stress tests’ and all that) hold more money on reserve after the financial crash? And interest rates were near zero?

  2. Hard numbers would be nice. Are we paying 1% more for a safer banking system; or 0.1% more? Or 0.01% more?

    What’s the overall cost (in £bn) to the economy?

  3. Sure, but didn’t ’08 show us that anyone (Spud excluded of course) knows more about banking than the banks do?

  4. Harry Haddock's Ghost

    I don’t understand. My mate Richard said that banks create all the money they lend. Why do they need capital?

  5. @ bis
    No, it showed us that somweone who has made a reutation running a supermarket knows less about banking than bankers do.

  6. That was just one bank, John. A symptom not the disease. It was the entire international banking sector & the whole toxic asset thing.

  7. @bloke in spain:
    It’s really not clear that anyone knows more about banking; the best you can claim is that banks were unstable, not that others knew better.

    There’s a million contradictory answers for what 2008 told us. My favourite was Fragile by Design, which essentially blames banks, voters, politicians, and institutions. The crash is basically labelled less as a failure and more ‘working as designed’.

  8. Safer banks in what sense? I don’t recall too many failing during the last government sponsored fiasco. Gordon Brown wore his underpants over his trousers and “saved” them with our money. Although to be fair their actions did nearly bankrupt several of the more risk free enterprises. If anyone thinks it would be any different next time then I have this bridge they might be interested in buying!
    Besides which, history shows us that government interventions of any sort tend to increase risk rather than reduce it. And the bond thing was nothing to do with risk and everything to do with the cost of government borrowing.

  9. The whole problem Mr Wonko. Banks forgot their duty of care to their depositors & got into bed with governments. So they further government priorities, not their depositors’ priorities. And the banks have facilitated the shit we’re in now.

  10. @ bis
    You said “anyone”, so I simply refuted your error.
    What ’08 showed us was a lot of things but primarily thaat bad regulation was far worse than no regulation so the greed and lack of morals of Californian “realtors (estate agents) and chancers (buying a house with a 100%, or nearly 100%, mortgage in the expectation of a price rise or just walking away unscathed if the price falls dumping the loss on the bank which was forbidden by the Clinton administration to discriminate against bad risks) could wreck American banks.

  11. John. The banks made the loans under those circumstances.”(The banks were) forbidden by the Clinton administration to discriminate against bad risks” Then all loans are bad risks. Don’t make loans. How long would Clinton’s policies have stood up against the total stoppage of the housing loan market? Banks have essentially become an arm of government.

  12. What if you're just blind to the obvious solution?

    《There are no solutions, only trade offs.》

    What if the BoE used indexation instead of raising rates to fight inflation?

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