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Post by Ton ⓉⓞⓃ on Jun 30, 2019 18:01:23 GMT
Can we please stop with this idea that somehow banks have been screwing lenders over by offering low deposit rates but raking in high fees when they lend the money out. Banks do not charge intermediary fees in loan lending because they do not intermediate. They do not take depositors money and lend it out. There is no 'money multiplier' or 'fractional reserve banking'. These ideas exist only in economic textbooks. In the modern monetary system with a fiat currency, the primary constraint is the price of money, not the amount. Banks create "inside money" ab-initio by creating loans; there is no need for depositors, only a need for regulatory reserves. Please see this link from the Bank of England. If you still refuse to believe me, I can provide equivalents links from the Fed, RBA, ECB etc.
The bottomline is that banks don't need depositors to make loans. They make loans and that creates the deposit. When they take external deposits, it is for other reasons than loan creation. Note also that banks always have BoE OSF and OMO facilities to borrow at.
Only shadow banks (Northern Rock, Lehman, pre 2008 say) would take depositors money and lend it out.
Great piece from the BoE, just got to understand it now...
but what would you say about the idea that FLS (Funding for Lending) from BoE was responsible for the dropin savings rates, i hold somewhat to this view.
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quidco
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Post by quidco on Jul 1, 2019 7:00:18 GMT
Can we please stop with this idea that somehow banks have been screwing lenders over by offering low deposit rates but raking in high fees when they lend the money out. Banks do not charge intermediary fees in loan lending because they do not intermediate. They do not take depositors money and lend it out. There is no 'money multiplier' or 'fractional reserve banking'. These ideas exist only in economic textbooks. In the modern monetary system with a fiat currency, the primary constraint is the price of money, not the amount. Banks create "inside money" ab-initio by creating loans; there is no need for depositors, only a need for regulatory reserves. Please see this link from the Bank of England. If you still refuse to believe me, I can provide equivalents links from the Fed, RBA, ECB etc.
The bottomline is that banks don't need depositors to make loans. They make loans and that creates the deposit. When they take external deposits, it is for other reasons than loan creation. Note also that banks always have BoE OSF and OMO facilities to borrow at.
Only shadow banks (Northern Rock, Lehman, pre 2008 say) would take depositors money and lend it out.
Northern Rock and Lehman's weren't "shadow bank"? Taking deposits and lending them out was the original building society model.
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littleoldlady
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Post by littleoldlady on Jul 1, 2019 7:00:18 GMT
Can we please stop with this idea that somehow banks have been screwing lenders over by offering low deposit rates but raking in high fees when they lend the money out. Banks do not charge intermediary fees in loan lending because they do not intermediate. They do not take depositors money and lend it out. There is no 'money multiplier' or 'fractional reserve banking'. These ideas exist only in economic textbooks. In the modern monetary system with a fiat currency, the primary constraint is the price of money, not the amount. Banks create "inside money" ab-initio by creating loans; there is no need for depositors, only a need for regulatory reserves. Please see this link from the Bank of England. If you still refuse to believe me, I can provide equivalents links from the Fed, RBA, ECB etc.
The bottomline is that banks don't need depositors to make loans. They make loans and that creates the deposit. When they take external deposits, it is for other reasons than loan creation. Note also that banks always have BoE OSF and OMO facilities to borrow at.
Only shadow banks (Northern Rock, Lehman, pre 2008 say) would take depositors money and lend it out.
I agree with the thrust of your comments but IMO you have overstated the case. Banks can lend out depositors' funds, although they are not restricted to those, otherwise a run on the bank a la Northern Rock would be impossible, also the FSCS would be pointless for banks.
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agent69
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Post by agent69 on Jul 1, 2019 7:28:03 GMT
Northern Rock and Lehman's weren't "shadow bank"? Taking deposits and lending them out was the original building society model. My recollection of Northern Rock is that taking deposits and lending them out wasn't the problem. They were using short term borrowing to fund long term lending, and when short term funding dried up due to the financial crisis, NR's business plan went down the pan.
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littleoldlady
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Post by littleoldlady on Jul 1, 2019 16:51:00 GMT
Northern Rock and Lehman's weren't "shadow bank"? Taking deposits and lending them out was the original building society model. My recollection of Northern Rock is that taking deposits and lending them out wasn't the problem. They were using short term borrowing to fund long term lending, and when short term funding dried up due to the financial crisis, NR's business plan went down the pan. Yes, and don't forget 125% mortgages. (I see something similar has come back on certain p2p sites  )
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alanh
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Post by alanh on Jul 8, 2019 9:26:36 GMT
Administrators update email in your inboxes
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michaelc
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Post by michaelc on Jul 8, 2019 13:06:33 GMT
Is it maybe, just maybe (and whispering this quietly) that rsm are treating this administration as fairly as possible because they know the size of the spotlight on them?
Yes I know in law administrators are supposed to do all kind of "fair" things but that often seems to end up with them taking a huge cut. In this case, with the large number of creditors watching and organising plus some media interest, could rsm be taking the view that they really need to be seen to be particularly reasonable on this one?
Its extremely early days but so far the communication has been reasonably good and that's a start.
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ilmoro
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Post by ilmoro on Jul 8, 2019 13:27:46 GMT
Is it maybe, just maybe (and whispering this quietly) that rsm are treating this administration as fairly as possible because they know the size of the spotlight on them? Yes I know in law administrators are supposed to do all kind of "fair" things but that often seems to end up with them taking a huge cut. In this case, with the large number of creditors watching and organising plus some media interest, could rsm be taking the view that they really need to be seen to be particularly reasonable on this one? Its extremely early days but so far the communication has been reasonably good and that's a start. Indeed. Something that had occurred to me. RSM have a good opportunity to corner the market as the FCA goto for P2P/altfi troubleshooting.
Interestingly altfi have just published their state of the market report, supported by RSM, introduction by one Damien Webb. ( link to request copy)
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averageguy
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Post by averageguy on Jul 8, 2019 16:25:55 GMT
Is it maybe, just maybe (and whispering this quietly) that rsm are treating this administration as fairly as possible because they know the size of the spotlight on them? Yes I know in law administrators are supposed to do all kind of "fair" things but that often seems to end up with them taking a huge cut. In this case, with the large number of creditors watching and organising plus some media interest, could rsm be taking the view that they really need to be seen to be particularly reasonable on this one? Its extremely early days but so far the communication has been reasonably good and that's a start. Indeed..I wonder how much we are paying for it ...I don’t mind value for money ....on performance to date I wish they’d got involved at Collateral
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adrianc
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Post by adrianc on Jul 8, 2019 16:46:09 GMT
on performance to date I wish they’d got involved at Collateral You can't really blame BDO for the COL mess. If there'd not been the RR fiasco and contributory data "loss", then everything would have been a heck of a lot smoother there. It wouldn't surprise me at all if the spotlight moves onto what happened in that initial period, and criminal charges may well come about.
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Godanubis
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Post by Godanubis on Jul 8, 2019 17:45:38 GMT
on performance to date I wish they’d got involved at Collateral You can't really blame BDO for the COL mess. If there'd not been the RR fiasco and contributory data "loss", then everything would have been a heck of a lot smoother there. It wouldn't surprise me at all if the spotlight moves onto what happened in that initial period, and criminal charges may well come about. Hopefully by the time all the current negative things surrounding P2P are resolved and a framework for good practice is generally adhered to. The sector should be better regulated and Platforms must have robust provision funds and recovery procedures for future loans that require regular updates from borrowers throughout the loan term with photographic and other supporting evidence.. This should minimise losses and give greater confidence to lenders resulting in more funds being available to viable projects.
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adrianc
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Post by adrianc on Jul 8, 2019 17:49:15 GMT
The sector should ... require regular updates from borrowers throughout the loan term with photographic and other supporting evidence. Sorry, but I think that's actually retrograde. Ly dev loans have/had regular independent monitoring surveyor visits and reports, f'rinstance. B'sides, all the problems with valuations were from nominally independent professional surveyors - and you want to go to basically self-cert?
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Godanubis
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Post by Godanubis on Jul 8, 2019 18:06:21 GMT
The sector should ... require regular updates from borrowers throughout the loan term with photographic and other supporting evidence. Sorry, but I think that's actually retrograde. Ly dev loans have/had regular independent monitoring surveyor visits and reports, f'rinstance. B'sides, all the problems with valuations were from nominally independent professional surveyors - and you want to go to basically self-cert? All the steps would be in addition to current situation and apply to all borrowers. Like most things three quotes would be advisable. If lenders are cautious and not over exposed then their individual losses are negligible. Tightening up the sector can only be beneficial to all. More viable projects that complete successfully gives more work for competent valuers and more security for lenders. Any incompetent professionals should be held accountable and removed from the professional register. I currently see this to be a very small number from a group of conscientious individuals.
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Post by mot on Jul 8, 2019 18:11:36 GMT
I like the way CROWD PROPERTY operate... extremely conscientious due diligence inc a webinar with the applicant .... 100% returns so far so good !
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averageguy
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Post by averageguy on Jul 8, 2019 18:11:38 GMT
on performance to date I wish they’d got involved at Collateral You can't really blame BDO for the COL mess. If there'd not been the RR fiasco and contributory data "loss", then everything would have been a heck of a lot smoother there. It wouldn't surprise me at all if the spotlight moves onto what happened in that initial period, and criminal charges may well come about. I think the non sale of the chattels as last reported is sufficient for me to wish someone else was running affairs....with you all the way on that last sentence
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