Heres my take.
Surely from now on all future lending is going to be scrutinised as to where it ends up. For example the new capitalisation will reduce the asset to lending ratio for banks existing balance sheet entries, and make it possible for them to return to inter bank lending as before.
But if you were the bank lending to the Irish Banks wouldn’t you be hesitant to lend to someone who has been told (by the government) to resume lending against assets which are almost certainly going to depreciate in value further.
Surely the loan to value ratio on offer from now on will be so low to exclude almost of all of those it is designed to help.
Yet the Government has targeted groups where the money it is investing is going to go to – ie SME’s, new home owners, etc.
I cant see how it can dictate where future lending can go if creditors of the banks – ie those who lend to the banks – have first say on where their own money goes. Surely they will be making a judgement call on the probability of getting their money back.
Anyway - if the Government wanted to ensure that money went to target groups within the economy it simply could have lent the money to them in the first place - an example of this would be the council purchase scheme for first time buyers.
As it stands surely any money pumped into the banks will have the effect of keeping the banking system on a sort of life support – So I cant see how normal lending can resume until the current depreciation of asset has bottomed out. Only then can normal lending resume …?
Surely from now on all future lending is going to be scrutinised as to where it ends up. For example the new capitalisation will reduce the asset to lending ratio for banks existing balance sheet entries, and make it possible for them to return to inter bank lending as before.
But if you were the bank lending to the Irish Banks wouldn’t you be hesitant to lend to someone who has been told (by the government) to resume lending against assets which are almost certainly going to depreciate in value further.
Surely the loan to value ratio on offer from now on will be so low to exclude almost of all of those it is designed to help.
Yet the Government has targeted groups where the money it is investing is going to go to – ie SME’s, new home owners, etc.
I cant see how it can dictate where future lending can go if creditors of the banks – ie those who lend to the banks – have first say on where their own money goes. Surely they will be making a judgement call on the probability of getting their money back.
Anyway - if the Government wanted to ensure that money went to target groups within the economy it simply could have lent the money to them in the first place - an example of this would be the council purchase scheme for first time buyers.
As it stands surely any money pumped into the banks will have the effect of keeping the banking system on a sort of life support – So I cant see how normal lending can resume until the current depreciation of asset has bottomed out. Only then can normal lending resume …?