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18-09-2020, 12:17   #496
theguzman
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Anybody who thinks the banks are fine this time around are absolutely kidding themselves. We have seen nothing yet of what is to come.
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18-09-2020, 15:34   #497
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I'm not convinced this will be the case, I suspect the stress tests were conducted using different economic forecasts, possibly not as severe as this down turn could be, and it's important to realise, most economic advisor's are still from the neoclassical school of thought, and its prediction models are notoriously poor at predicting. Hopefully I'm completely wrong, as we do not need another financial crisis, it could be completely devastating, globally, it's also extremely important to realise, our own banks maybe sufficiently funded, but international banks may not be. Some commentators believing, some major international banks, could effectively fall over with even a slight gust. I'm not convinced anyone truly knows what could or couldn't happen, we simply don't know for sure, such is the complexity of these systems and processes, they only thing I'm sure of is, our track record of such predictions, particularly from mainstream, is beyond woeful. there's something seriously wrong with neoclassical and it's models, yet we still persist with this school of thought, it has not accepted it's failures from the past, and we largely have not accepted it's failures, this could be disastrous for us all



We simply don't know this, nobody knows for sure, nobody seen lehmans coming, but some realised something major was coming, but they were ignored and even ridiculed, they still are largely ignored....
Yes I agree, if the stress test models predictions are flawed and don't take into account such a severe stress then banks will be under capitalised and will be in trouble. That all comes down to how good the regulator is and how strong the stress tests are. If we are to believe that banks are stress tested appropriately then things should be ok as the banks should have sufficient capital and liquidity buffers in place to deal with the stress.

Things are different this time around as to when lehmans went under as back then it was a liquidity crisis where banks stopped lending to each other on the inter-bank market. Now days there is a limited inter-bank market as the central banks have stepped in and replaced much of this and will inject the necessary liquidity into the market to keep the cogs turning. (This may have other impacts on the currency, sovereign debts markets) In addition to this banks now have got liquidity asset buffers that they didn't have in place back then so I see it as a very different situation.

Yes people were "ignored and even ridiculed" and that will happen again as people always think they know better than everyone else and unfortunately it is not possible to predict the future accurately so there will always be areas that have been over looked. The funds industry is one where I think there is a risk of this happening as there is light regulation and most of the risks are managed via in-house risk models where there is a high chance that certain risks have been over-looked or played down. The Banking Sector has had a lot of focus on it and hopefully have done enough to protect the banks from another crisis. But then again saying all that you need to look and see who has lent to the funds industry!!!

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I'd have to disagree here, regulations didn't go far enough, regulations such as the reinstatement of the Glass–Steagall act should have also been done, to increase the safety of our global financial systems. The world of neoclassical still also doesn't accept critical facts such as bank creation of money in the form of credit, which played a critical role in the last crash. It's also important to realise, some commentators believe that depositors are now less protected under new bail in rules, which in the event of a banking crash, there's an increased chance of deposits being bailed in, in order to save the bank, we simply don't know until this occurs, if it even does.
Yes more could have been done on the regulation front and yes you are right that they should have reinstated the Glass-Steagall act. If you look at the UK they introduced some similar along the lines of ring-fenced banks which is similar to the Glass-Steagall act bu not all countries have done so and because of this we have a situation where normal customer depsoits are providing the underlying capital to fund the debt issued to more risk sectors. If you look at my example of the funds industry you will more than likely find that any lending to these institutions will be funded via normal retail customer deposits and therefore there is a risk that exists that would not have had the Glass-Steagall act been adopted everywhere.

As for your point about Deposit guarantee schemes these are only as good as the paper they are written on and there existence is only there to provide a consumer confidence to prevent a run on the banks. I think most of these schemes will have serious flaws in them if a situation ever arose where they were enacted. It is all about consumer confidence similar to why people are happy to rely on Coins and Notes.

It is highly unlikely that customer funds would be bailed in to rescue a bank as new regulation has resulted in a increase in banks issuance of AT1(CoCo) bonds that will convert to equity if capital triggers are met. And in the event of a resolution of a bank there will be "Bail in" bonds that will convert to equity in the event of the resolution of a bank and as such provides protection to customer deposits.

I'm not saying that it is not possible for a bank to go under but I believe that a lot has been done on the regulatory front to make it a controlled explosion this time around and therefore it is a different situation to the 2008 financial crisis.
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22-09-2020, 08:48   #498
Roger the cabin boy
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Stocks are trending down, redundancies are creeping up (see Premier inns reducing workforce by 20% today). Banks beginning to close (Ulster)

Here we go?
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22-09-2020, 08:50   #499
Wanderer78
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Stocks are trending down, redundancies are creeping up (see Premier inns reducing workforce by 20% today). Banks beginning to close (Ulster)

Here we go?
sadly, yup, this could be a scary one, batten down the hatches!
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22-09-2020, 10:58   #500
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Stocks are trending down, redundancies are creeping up (see Premier inns reducing workforce by 20% today). Banks beginning to close (Ulster)

Here we go?
The stock market is not the economy and is not always a reliable indicator of such. I think the US market over last 6 months is evidence of this.

Banks are not beginning to close. A commercial decision whether to wind down Ulster Bank is expected to be made at the end of next month. Not surprising given it has under performed since its was bailed out by RBS.

Is the economy going to struggle - in certain sectors yes, but not for the reasons outlined above.
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22-09-2020, 11:51   #501
Timing belt
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The stock market is not the economy and is not always a reliable indicator of such. I think the US market over last 6 months is evidence of this.

Banks are not beginning to close. A commercial decision whether to wind down Ulster Bank is expected to be made at the end of next month. Not surprising given it has under performed since its was bailed out by RBS.

Is the economy going to struggle - in certain sectors yes, but not for the reasons outlined above.
Obviously the tourism/hospitality/airline industry are going to struggle but what other sectors do you see struggling?
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22-09-2020, 12:11   #502
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Obviously the tourism/hospitality/airline industry are going to struggle but what other sectors do you see struggling?
Retail, Foreign language schools ,Transport (private mainly but public as well) ,commercial landlords to name a few
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22-09-2020, 13:24   #503
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Return of crowds to sporting events in UK put back. Now huge pressure on a lot of sports over there. Hoping we can somehow manage to keep sport going in a limited capacity at least.
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22-09-2020, 13:57   #504
Roger the cabin boy
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Quote:
Originally Posted by wassie View Post
The stock market is not the economy and is not always a reliable indicator of such. I think the US market over last 6 months is evidence of this.

Banks are not beginning to close. A commercial decision whether to wind down Ulster Bank is expected to be made at the end of next month. Not surprising given it has under performed since its was bailed out by RBS.

Is the economy going to struggle - in certain sectors yes, but not for the reasons outlined above.
Deutsche Bank to close 20% of domestic branches
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22-09-2020, 14:06   #505
coolshannagh28
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Originally Posted by wassie View Post
The stock market is not the economy and is not always a reliable indicator of such. I think the US market over last 6 months is evidence of this.

Banks are not beginning to close. A commercial decision whether to wind down Ulster Bank is expected to be made at the end of next month. Not surprising given it has under performed since its was bailed out by RBS.

Is the economy going to struggle - in certain sectors yes, but not for the reasons outlined above.
Its hard to predict , our govt seems fairly confident that the MNC sector can compensate for the falls in more exposed sectors such as tourism and hospitality however there is a possibility that if the world economy drags due to covid that MNCs may begin to rationalise spelling trouble in this vital sector.
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22-09-2020, 14:54   #506
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Anybody who thinks the banks are fine this time around are absolutely kidding themselves. We have seen nothing yet of what is to come.
Do you expect GDP to fall in 2021?


This is what the ECB expect for the EU:

https://www.ecb.europa.eu/pub/projec.../index.en.html

2020 = -8%
2021 = +5%


This is what the OECD expect:

http://www.oecd.org/economic-outlook/

http://www.oecd.org/economic-outlook/#gdp-projections

Euro area
2020 = -7.9%
2021 = +5.1%
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22-09-2020, 16:25   #507
Wanderer78
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Originally Posted by coolshannagh28
Its hard to predict , our govt seems fairly confident that the MNC sector can compensate for the falls in more exposed sectors such as tourism and hospitality however there is a possibility that if the world economy drags due to covid that MNCs may begin to rationalise spelling trouble in this vital sector.
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Do you expect GDP to fall in 2021?
Yea I wouldn't be as confident, I certainly wouldn’t be trusting anything coming from an equilibrium based model anyway, we re absolutely in the unknown here, nobody knows, and relying on mnc's is lethal, they can easily pull back, and still survive, there's probably still plenty of scope for them in financial activities such as share buy backs
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22-09-2020, 16:53   #508
wassie
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Yes - in Germany. Deutsche Bank dont offer retail services in Ireland.

Do I see banks taking the opportunity to close branches - definitely. Banks are always looking for way to save costs and this will be the perfect cover to close down those branches that are/were considered uneconomic.

But in terms of actual banks closing down that you inferred earlier (i.e. Ulster) - no.
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22-09-2020, 16:58   #509
Wanderer78
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Yes - in Germany. Deutsche Bank dont offer retail services in Ireland.

Do I see banks taking the opportunity to close branches - definitely. Banks are always looking for way to save costs and this will be the perfect cover to close down those branches that are/were considered uneconomic.

But in terms of actual banks closing down that you inferred earlier (i.e. Ulster) - no.
unfortunately im expecting a financial sector wobble very very soon, particularly globally, of which we re complexly intertwined with, a very similar set of circumstances is currently at play in the sector, compared to pre 07/08
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22-09-2020, 17:16   #510
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I don’t think the closure of branches is due to covid. All banks want to close branches and get customers to use digital platforms. Covid may speed this process along.

What will be interesting with the banks is whether we will see a credit risk appetite reduction in certain sectors once the increase in non performing loans start to eat into there capital reserves.

If there is a credit squeeze it will slow down the overall economy so will be interesting to see if the action taken by ECB/countries to cut capital buffers is enough to prevent this.
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