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Scotland's Banks



October 07, 2008 – Comments (7)

Yves has a post about how Scotland's banks are asking for capital...

The media bites a certainly professional...  

"On paper, Lloyds TSB, RBS and Barclays don't have a pressing need for additional capital.

But they have become concerned that they are being weakened significantly by investors' perception that they are short of capital and their balance sheets need to be strengthened. "

Well, if assets were marked to a fair value those balance sheet would probably look a lot different...

This one got my attention because it mentions the Royal Bank of Scotland.  We have a Royal Bank of Canada and it made me realise I don't the history of these banks and how related they might be.  I got most my friends out of banking stocks last year.  I don't think this looks good for the RBC.

The graph posted on Yves post is truly cliff diving...  Ugly!

And my goodness, downgraded to A-.

I would like to point out an important difference between the UK and North America.  Already, well before the bubble popping, their standard of living was such that many people live in shared accommodations.  There are many houses etc. that have as many unrelated adults in them as there are bedrooms, and sometimes more if there are couples.  It means that Britain has already done a lot of increasing household size for affordability reasons.  This hasn't happened much in the US yet and the implications of a reversal in the square feet of household living space per person will probably be huge in a down turning economy.  And there is way, way, way more room to do this in the US then in Britain.  It also means that price supports for housing in Britain is higher because there are more people with income in a household.

7 Comments – Post Your Own

#1) On October 07, 2008 at 8:24 AM, Terok1313 (29.22) wrote:

On that difference between the UK and NA, doesn't it also imply that the UK's housing bubble was significantly worse than that of North America?  It it takes 4 adults to afford a house there, then UK prices simply have that much further to fall compared to NA house prices.  I'm not convinced that it will instead translate into a sharp decline in living space here.

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#2) On October 07, 2008 at 8:36 AM, dwot (29.44) wrote:

Terok, as long as those 4 adults have no place else to go, which is likely to remain true, their housing has a higher support. 

Think of it this way...  The guy that owns the place perhaps make 30,000 pounds.  He gets an additional 15,000 pounds in rental income from renting the extra rooms in his home and he also has the benefit of reduced utilties because heating the place is being shared.  So really his income is much higher because of the rental income.  And that is mostly under the table so it isn't showing up in the average income data.

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#3) On October 07, 2008 at 9:22 AM, GNUBEE (< 20) wrote:

I thought the sound bite of Brits withdrawing savings en mass from British banks and moving them to Irish banks was interesting. (Government guarantees are unlimited in Ireland?) 

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#4) On October 07, 2008 at 12:43 PM, waldguy (< 20) wrote:

We have neighbors who moved to Canada from Britain so they could have the chance to own a home (and a yard).

This from

House of pain

£162,666 cost of the average first home

£27,738 average cost of deposit, stamp duty and solicitor’s fees for a first-time buyer

66% the proportion of take-home pay that a couple on average earnings would have to set aside for a year to cover the costs of buying a home

20% the proportion that they had to set aside in 1997

7.15% the average rate on a five-year fixed mortgage for a buyer with a 5 per cent deposit

Sources: RICS, Department of Communities and Local Government


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#5) On October 07, 2008 at 3:19 PM, BigFatBEAR (28.45) wrote:

Just noticed you're #1! Congrats on being on top of the whole CAPS community!!

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#6) On October 07, 2008 at 3:44 PM, JonBarleycorn (69.67) wrote:

Congratulations on becoming Top Fool! It couldn’t happen to a nicer person.

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#7) On October 07, 2008 at 6:49 PM, dwot (29.44) wrote:

walkguy, when you look at those figures and consider the pay, that is so expensive...  If memory serves me, minimum wage is 4 pounds something?  Affordability standards means you'd have to make about 52,000 pounds, a handsome wage from what I saw.

Thanks so much bigFatBEAR and JonBarleycorn.

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