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  1. #91
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    Admittedly I don't understand how it all works but my basic understanding is that banks will need to have more equity as a percentage of total assets. This is to reduce risk to depositors who have no govt guarantee or depositors insurance. Doesn't sound like a bad idea to me. But I guess anything that might reduce the increase in debt and asset prices is not a good idea according to economists and banks who are well known for their responsible lending.

  2. #92
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    Quote Originally Posted by Aaron View Post
    Admittedly I don't understand how it all works but my basic understanding is that banks will need to have more equity as a percentage of total assets. This is to reduce risk to depositors who have no govt guarantee or depositors insurance. Doesn't sound like a bad idea to me. But I guess anything that might reduce the increase in debt and asset prices is not a good idea according to economists and banks who are well known for their responsible lending.
    I agree with you Aaron

    Hypothetical question for anybody interested: What would you say if someone offered you an investment with a promised pre-tax return of close to say 20% pa over many years?.

    You mighty say: “How much can I buy?” or like most sensible people: “What is the catch?”

    Think about it
    “In a roaring bull market, knowledge is superfluous and experience is a handicap.”

    –Benjamin Graham”

  3. #93
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    I am warming to Adrian Orr, someone prepared to call bull**** on the banks and their whining over capital requirements. This is what I don't like about the news this article highlights bickering but I thought the paragraphs near the bottom held the real news. Sorry just read this again it is not journalism just an opinion piece.

    "Orr suggested that the NZBA's submission had claimed that "if banks fail it should be our fault and we should pay them out anyway", something he believed was "astounding""

    "NZBA has denied suggesting that the government should ever bail out the banks, saying that instead an independent report merely speculated that in the event of a bank failure
    a government would be reluctant to allow customers to take a haircut on their deposits."


    So the banks would rather provide "customers" a haircut on their deposits rather than hold more capital to try and deal with a crisis. What a bunch of s**tbags.

    https://www.stuff.co.nz/business/113...ose-to-warfare
    Last edited by Aaron; 05-06-2019 at 09:40 AM. Reason: removed snarky comment re John Key detracts from the real issue

  4. #94
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    We can criticise the banks for resisting calls from the RBNZ for increased capital requirements but would do well to remember that the resultant numbers are calculated based on individual banks' lending. Tougher, higher capital levels will inevitably cause banks to be more restrictive in their approval of loans; more risk-averse; more selective in allocating funds to the safer, more profitable business. The days of readily available bank loans may be drawing to a close.

  5. #95
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    Quote Originally Posted by macduffy View Post
    We can criticise the banks for resisting calls from the RBNZ for increased capital requirements but would do well to remember that the resultant numbers are calculated based on individual banks' lending. Tougher, higher capital levels will inevitably cause banks to be more restrictive in their approval of loans; more risk-averse; more selective in allocating funds to the safer, more profitable business. The days of readily available bank loans may be drawing to a close.
    The days of readily available bank loans may be drawing to a close ..... that would be a good outcome eh macduffy

    Many banks have a pre-tax ROE approaching 20% - as I said the other day:

    What would you say if someone offered you an investment with a promised pre-tax return of close to say 20% pa over many years?.

    You mighty say: “How much can I buy?” or like most sensible people: “What is the catch?”
    “In a roaring bull market, knowledge is superfluous and experience is a handicap.”

    –Benjamin Graham”

  6. #96
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    Quote Originally Posted by macduffy View Post
    We can criticise the banks for resisting calls from the RBNZ for increased capital requirements but would do well to remember that the resultant numbers are calculated based on individual banks' lending. Tougher, higher capital levels will inevitably cause banks to be more restrictive in their approval of loans; more risk-averse; more selective in allocating funds to the safer, more profitable business. The days of readily available bank loans may be drawing to a close.
    As a depositor with a bank I am overjoyed to hear this. If I was lending the money myself directly and bypassing the bank I would probably want a first mortgage and at least 30% equity from the borrower for a house loan. I don't think I would lend on a business start-up unless they had a house as security.

    Although that said I do already know I currently have access to credit if needed so feel for anyone starting out and having to go through the process. If the bank was going to extend me more credit I would hope they would check out my financial situation and make some assessment of how risky the loan might be. Chances are when I finally want to draw down the world will be in crisis and the bank will close the account after having paid them a fee for all these years.

  7. #97
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    Every time we have re-finance / re-fix our home loan, and the bank tells us what they would be prepared to lend us, it's painfully obvious what the problem is. If we took them up on their offer we would be WAY over extended. It's not very responsible lending, but it also comes down to the individual to have done a budget and know what they can personally afford (is there such thing as personal accountability in this world anymore?)

  8. #98
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    Quote Originally Posted by tga_trader View Post
    (is there such thing as personal accountability in this world anymore?)
    That unfortunately has been bureaucratically legislated away the last 30 years.

    I do think banks though should not be regulated as much but on the flip side should also be allowed to go under and there needs to be more accountability if they bugger up their book by being irresponsible. I guess the banks are in a win/win situation at the moment, being able to use gambling mentality knowing that there is no real accountability if things go tits up.

  9. #99
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    Quote Originally Posted by blackcap View Post
    That unfortunately has been bureaucratically legislated away the last 30 years.

    I do think banks though should not be regulated as much but on the flip side should also be allowed to go under and there needs to be more accountability if they bugger up their book by being irresponsible. I guess the banks are in a win/win situation at the moment, being able to use gambling mentality knowing that there is no real accountability if things go tits up.
    Which is why we appreciate Adrian's attempt to look after our deposits. The bank manager has a responsibility to look after depositors money but he also has no motivation to do so, in fact he will do better by meeting his targets each month.

  10. #100
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    The days of readily available bank loans may be drawing to a close ..... that would be a good outcome eh macduffy
    Agreed, winner, but I'd be more concerned with the effect on business and the economy generally. Let's not go back to the pre-1980's days of periodic credit squeezes and banks having to divert a large chunk of their funding into Reserve Assets, as determined monthly by the RB.

  11. #101
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    Apparently Orr fends off any criticisms of his tree god nonsense with the allegation that criticism is racist

    Quite sad really
    Last edited by winner69; 11-06-2019 at 04:30 PM.
    “In a roaring bull market, knowledge is superfluous and experience is a handicap.”

    –Benjamin Graham”

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