Lending to UK households picked in September, driven mainly by a sharp rise in unsecured lending, according Bank of England data out on Monday.
Total lending to individuals (excluding student loans) rose by £1.7 billion in September, compared to the previous six-month average increase of £0.6 billion. The twelve-month growth rate was 0.7% (Table A). Read more
Credit Suisse’s answer last week to the (rather odd) idea of the British government “cancelling” (restructuring) the gilts held by its central bank under quantitative easing…
From the bank’s credit analyst William Porter, it’s worth a read:
Any financial problem can be solved at a stroke if double-entry book-keeping can be ignored as a constraint. The problem is, it cannot. So debate in the private-sector financial community about “solutions” to the UK’s financial challenges based on ignoring it worry us. In the UK, Mervyn King has been quick to debunk the fallacies. But if they can exist even for a while in the very simple UK, then the infinitely more complex euro area (which we do not address in detail here) is fertile ground for solutions based on fallacious reasoning…
A particularly charged address from the Governor, perhaps…
FSA chief, Lord Turner, gave a *cough* wide ranging speech last night in the City. From the FT:
Although the FSA chairman never mentioned that he had applied to replace Sir Mervyn King as a potential governor of the Bank of England, the speech highlighted his willingness to take bold and unorthodox action to promote growth.
Lord Turner, Paul Tucker, a deputy governor, and Sir John Vickers are among the leading candidates to take charge of the BoE, which will have expanded powers next year. Paddy Power, the bookmaker, puts even odds on Mr Tucker. Sir John is at 4-1 and Lord Turner 9-2.
Here’s the full thing for those who want it. And some excerpts if you don’t (with our emphasis): Read more
Mervyn King gave a “personal assessment” of the inflation targeting regime over the past twenty years on Tuesday night. And seemed to suggest that it may be best to allow UK inflation to over-shoot the 2 per cent target given the current economic environment in order to minimise volatility. Read more
The window to apply for Mervyn’s seat at the Bank of England just crashed shut. Gus decided against making a pitch and Glenn is looking shaky. Leaving Tucker in the lead, with Turner in second place… unless somebody has ghosted in under the radar, that is. Read more
To summarise my assessment of markets at this point I would no longer say that they are healing. Rather, markets are scarring over – adapting and evolving to the new environment.
That’s from the BoE’s Paul Fisher’s speech to Richmond University. It’s worth a read. Read more
The minutes to the Bank of England’s September meeting are out, and we can’t help being drawn to the following comments about the UK’s labour productivity puzzle (our emphasis):
The labour market had remained surprisingly resilient in the face of the contraction in activity. The unemployment rate had fallen to 8% in the second quarter, its lowest level for around a year, and employment was estimated to have risen by more than 200,000, with a rise in permanent employees accounting for more than half the increase. Read more
‘… 3 Sunday…13th after Trinity…11am WAR’
That’s from the August-September 1939 diary of Montagu Norman, the Bank of England’s longest serving governor, who held the job down from 1920 to 1944. Click to view. Read more
This the Bank of England’s report into the distributional effects of its asset purchases. Click through the image for the full doc:
Brace yourself. We have a formula:
P(eventi) = α + βXi + εi Read more
Click to enlarge:
It’s the product of all those Select Committee hearings, including appearances by Messrs. Diamond and Tucker. It is only a preliminary report. But it does not have kind words for the authorities who failed to stop the attempted manipulation of Libor before and during the financial crisis. (Barclays management is of course completely coruscated.) As jaded as we’ve all become by the Libor scandal, it’s pretty damning. Read more
The minutes of the Bank of England’s last MPC meeting reveal that some members were like hmmm concerning more asset purchases. In BBC headline-speak, that’s “Bank of England MPC members hint at further QE stimulus”. In the actual minutes, it went a bit like this:
For some members the decision was nevertheless more finely balanced, since a good case could be made at this meeting for more asset purchases. Read more
A little update on what short-term rates are pricing in when it comes to BoE meetings this fall courtesy of ICAP’s Nick Middleton.
As he observes, something of a 25 bps cut definitely being eyed to some degree: Read more
This seems wholly inadequate Read more
The U.K. economy has been flat for nearly two years. This stagnation has left output per capita a staggering 14 percent below its precrisis trend and 6 percent below its pre-crisis level. Weak growth has kept unemployment high at 8.1 percent, with youth unemployment an alarming 22 percent.
The effects of a persistently weak economy and high long-term unemployment can reverberate through a country’s economy long into the future—commonly referred to by economists as hysteresis. Read more
Some emails between Paul Tucker and Bob Diamond courtesy of John Mann MP. Not as explosive as billed but there is a Libor-headed email to Bob that makes reference to HSBC, RBS “Stuart”, “Johnny” and Mark Dearlove from May 2008.
Click through the pics for the full docs (although there ain’t that much more): Read more
Aka: an attempt to fill in the missing pieces of the underpants gnomes’ collateral swap, details of which were revealed last week.
First a reminder of how this will work, from Claire Jones over at Money Supply: Read more
The UK’s Office for Budget Responsibility is in desperate need of a graphic designer…
Click the pic for the live* feed from Wilson Room, Portcullis House…
Revealing little, but here it is — the Bank of England’s response to a Freedom of Information Act request from John Mann MP, seeking “copies of emails and transcripts of telephone conversations between Deputy Governor, Paul Tucker and Bob Diamond, Chief Executive of Barclays between 1 October 2008 and the 30 November 2008.”
Covering letter… (click the images) Read more
And lo, did the market move. From the BoE:
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to increase the size of its asset purchase programme, financed by the issuance of central bank reserves, by £50 billion to a total of £375 billion… Read more
We are seizing control of the regular Wednesday US Markets Live slot to bring you live commentary on Bob Diamond’s testimony to the Treasury Select Committee.
The show kicks off at 2pm, BST, here. Read more
First, a tip for Bob Diamond’s successor as chief executive at Barclays: Don’t threaten the Bank of England. It will get you deported. Read more
How can banks make wise credit intermediation decisions when they don’t know the people or businesses to whom they are lending?
Better understanding of clients, not less, is what helps to improve banking. Read more
Isn’t it annoying when particular clients insist on being treated differently to everyone else? Like, just because your client is well, England, or Italy, or some other sovereign nation, doesn’t make them ‘special’. It’s also kind of annoying when they make regulations that make business tougher for banks and then still expect to be treated differently.
Interestingly though, the Bank of England just stopped asking for one such special exception when it comes to certain derivatives that it enters into on behalf of the nation in order to best manage its balance sheet and the Treasury’s foreign exchange reserves. Read more
From an engaging speech by Robert Jenkins — former F&C chairman, now a member of the Bank of England’s interim Financial Policy Committee — to the “trillion dollar generation” of hedgies at the Gaim conference in Monaco…
My third and final observation is that the days of instant market pricing and limitless liquidity may be fading. The “great moderation” conditioned many to underestimate credit risk. It also bred a generation of traders, money managers, bankers and risk officers to presume an unfettered flow of capital and instant access to narrow bid/offer spreads. Those of you who operate in less liquid instruments do not need reminding. You deal with it daily. Those of you who traded asset backed securities in 2008 can testify to the speed with which liquidity can disappear. Yet despite these examples, many continue to assume that at the currently liquid end of the trading security spectrum “liquidity” is free and will be freely available. Short term traders count on it; algo-trading depends on it. Long/short strategies presume you can short. Stop-loss disciplines demand you can cover – and cover quickly. Read more
The minutes from the latest MPC meeting are out, and it seems the doves are gaining ground:
Regarding the stock of asset purchases, five members of the Committee (Charles Bean, Paul Tucker, Ben Broadbent, Spencer Dale and Martin Weale) voted in favour of the proposition. Four members of the Committee voted against the proposition. The Governor, David Miles and Adam Posen preferred to increase the size of the asset purchase programme by £50 billion to a total of £375 billion. Paul Fisher preferred to increase the size of the asset purchase programme by £25 billion to a total of £350 billion. Read more
The market continues to chew over last week’s surprise announcement by the Bank of England and the Treasury about a collaborative funding initiative for UK banks under their joint auspices.
Under the initiative the Treasury will back a “funding for lending” programme, which is intended to reduce borrowing costs to those banks that engage in lending, while the Bank of England breathes life into a previously announced Extended Collateral Term Repo (ECTR), a cross between a UK LTRO equivalent and a credit easing programme. Read more