Co-op Bank fails stress test and Lloyds and RBS remain at risk

[Lethn]

http://www.bbc.co.uk/news/business-30491485

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[botany]

Under the test, house prices would collapse by 35%, unemployment would surge by 12%, interest and inflation rates would rise and financial markets would collapse by 30%.

The stress test looks pretty stringent to me. If most banks have not failed it, this is good news.

[Lethn]

Heh, those numbers look pretty meaningless to me, 35% with this amount of hyperinflation around the world? They won't stand a chance.

[botany]

Heh, those numbers look pretty meaningless to me, 35% with this amount of hyperinflation around the world? They won't stand a chance.

House prices have increased rapidly and we could be staring at a bubble. So hyperinflation or not, a crash in housing prices cannot be ruled out. If a bank has high proportion of mortgages, it could be disproportionately impacted by such a collapse.

[Skinnyman]

What did they actually expect. I can tell you one thing, the banks aren't sustainable the way they're currently operating and I think it's only a matter of time before the western world sees another financial crash that could be catastrophic.

[teukon]

Under the test, house prices would collapse by 35%, unemployment would surge by 12%, interest and inflation rates would rise and financial markets would collapse by 30%.

The stress test looks pretty stringent to me. If most banks have not failed it, this is good news.

They only push interest rates up to about 4% in these stress tests.  That doesn't seem altogether so stressful given historic norms:

The base rate has been pretty much flat at 0.5% since 2009.

[redHairy]

stress test are like Standard & Poor outlook/ratings!!!

do you remember S&P rating about Lehman Brothers??

now we know the truth!!!
and the truth was not what Standard & Poor have said

[botany]

Under the test, house prices would collapse by 35%, unemployment would surge by 12%, interest and inflation rates would rise and financial markets would collapse by 30%.

The stress test looks pretty stringent to me. If most banks have not failed it, this is good news.

They only push interest rates up to about 4% in these stress tests.  That doesn't seem altogether so stressful given historic norms:
The base rate has been pretty much flat at 0.5% since 2009.

Would significantly higher interest rates alone impact banks? I guess they should have their interest rate risk covered. Most of the loans made to corporates would be floating rate and linked to LIBOR. Hence interest income would actually increase to offset higher interest that they pay on deposits.

Higher interest rates would have secondary impact (lower loan offtake, collapse of financial markets, etc) which could have been factored in while doing the stress tests.

[Lethn]

My knowledge of economics isn't that detailed on LIBOR and the interest rates etc. but I am focused a lot on all the money printing and extremely dodgy shit happening with the precious metals markets and just seeing if the central banks even have any gold anymore let alone silver.

I think though higher interest rates would affect the banks lending policies quite a bit but as usual the news networks will focus on totally irrelevant crap to keep the public ignorant of what's going on behind the scenes. It's like when they talk about reducing the deficit all the time and quietly increase the spending or forget to mention that the whole system operates on the constant borrowing and lending of debt and would collapse in on itself it anyone actually did anything about the budget.

[exoton]

Heh, those numbers look pretty meaningless to me, 35% with this amount of hyperinflation around the world? They won't stand a chance.

This would be similar to the recent economic crisis in the US. Housing prices fell by an average of roughly 1/3 nationwide and by ~75% in several cities where house prices appreciated the most during the bubble.

The unemployment rate was well over 10% in the US and the real unemployment rate once you factor in the fact that many people were taking part time jobs and jobs they were massively overqualified for was much higher.

[botany]

My knowledge of economics isn't that detailed on LIBOR and the interest rates etc. but I am focused a lot on all the money printing and extremely dodgy shit happening with the precious metals markets and just seeing if the central banks even have any gold anymore let alone silver.

Yes, why worry about banks when the problem is with the central bank? 

[Q7]

Looking at the data, it seems that current projection that the economy is actually doing pretty well/or recovering seems to be very fake. Another collapse would spell disaster.

[scarsbergholden]

stress test are like Standard & Poor outlook/ratings!!!
do you remember S&P rating about Lehman Brothers??
now we know the truth!!!
and the truth was not what Standard & Poor have said

S&P, Fitch, Moody's, they all got it wrong and geologists still cant predict earthquakes..whats up with that?!

The financial crisis was statically very unlikely to happen, something that would be expected to happen less then once in a lifetime. It would not be expected that the 'experts' be able to predict such a crisis

[bigtimespaghetti]

My knowledge of economics isn't that detailed on LIBOR and the interest rates etc. but I am focused a lot on all the money printing and extremely dodgy shit happening with the precious metals markets and just seeing if the central banks even have any gold anymore let alone silver.

I think though higher interest rates would affect the banks lending policies quite a bit but as usual the news networks will focus on totally irrelevant crap to keep the public ignorant of what's going on behind the scenes. It's like when they talk about reducing the deficit all the time and quietly increase the spending or forget to mention that the whole system operates on the constant borrowing and lending of debt and would collapse in on itself it anyone actually did anything about the budget.

Have a quick look who owns majority holdings in many major silver producers. I'm not convinced banks give a fig about supply or price. They make money either up or down.

[Lethn]

Oh I know exactly what you mean, most traders make money off volatility, not long term prospects, they might bitch and moan about volatility on television and in news articles but you can bet secretly they're buying that shit up like crazy when it drops no matter what it is.

[TonyOliver]

If we keep printing extra money to cover the deficit -that should cause inflation - as we are creating extra money without creating extra value. House prices should then inflate which should cushion the banks from this potential increase in the base rate.

I dont see the base rate increasing any time soon with the low oil prices - and I dont see a housing price correction ant time soon. 

Garry

[lihuajkl]

The gov and bank industry just want to make the investors, depositors or other related parties comfortable with the banks who are passing the test and can proudly claim they can withstand any severe economic situation! But I think it is meaningless to prevent economic crisis and bank collapse. When the time comes, it comes! Coz the nature of capital is to maximize the profits and the nature of ppl who are controlling it is greedy and lazy and will cross the line to fit themselves!

[botany]

Oh I know exactly what you mean, most traders make money off volatility, not long term prospects, they might bitch and moan about volatility on television and in news articles but you can bet secretly they're buying that shit up like crazy when it drops no matter what it is.

This is one reason why some Wall Street traders moved into trading bitcoins recently.
They love the volatility and feel the market is mispricing everything.