Will 1 Bank Lead Us Out Of The Present Credit Crunch?
The Royal Bank of Scotland is one of the largest banks globally, and it’s just experienced a seriously important week. First of all it attempted to raise another tranche of billions of pounds of new capital by a rights issue, only to see this rebuffed by the shareholders. The major reason for the failure is reported to be that the price of the shares in the offer was more than their current market value. Although, to be fair to the bank it’s difficult to imagine how any institution can accurately forecast its share price months ahead in the Present Crisis.
This setback then led the government to step in & buy more shares in the bank in order to inject the necessary funds. The government, on behalf of Tax Payers is now by far the largest shareholder in the Bank with some 60% of the shares.
At the same time as this transaction was being finalised, the Chancellor of the Exchequer said that, if necessary, he was going to “hold Banks’ feet to the fire” in order to make them comply with the government’s wish that all the UK banks would employ the government injected money to uphold their lending to small businesses and Home Buyers. The Chancellor also made it extremely clear that he expects banks to allow a lot more time for House Buyers to bail themselves out when they get into problems with their mortgages. He expressed the opinion that there ought to be a minimum of 6 months wait before any legal recovery actions are set in motion. This should, he insisted, allow Home Buyers who’ve lost their jobs time to find new employment and start to put their finances back in order.
The government’s reasoning behind this is to bring some level of buoyancy back to the House Sales UK market, and therefore, in turn, to give families and couples the confidence they need to Buy Houses once again.
It wasn’t any real revelation then when the Royal Bank of Scotland declared on 1st December that from now on, it won’t start any recovery procedures against House Buyers who are behind with their payments until a minimum of 6 months after the arrears begin.
The Bank also announced that its current lending to small businesses is just as high as it was this time last year.
The government must now be hoping that these actions will oblige the other major High Street Banks to follow suit, and that the combined effect of all the Banks and Building Societies will give a boost in confidence to small businesses, employees and Home Buyers. This in turn should bring back some degree of buoyancy to the House Sales UK market.
Posted by Carlos Sagastume on December 6, 2008. Filed under HUD Homes.
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