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UK Regulator Approves 5 New Banks, with 30 New Banks Expected; Credit Market Very Bullish, 125% LTV to make a come back
Topic Started: 16 Aug 2014, 11:30 AM (1,940 Views)
Bardon
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Yes thirty, this is new banks not new branches, banks create credit and increase shareholder value, what does that say about the credit market outlook to you?

And as the visionary David Ricardo said all those years ago, something that has been proven through the test of time, all this new credit must end up in increasing land values.



"Axis, Union Bank among five new entrants into UK banking space
PTI Jul 9, 2014, 03.54AM IST


(In the 12-month period,…)
MUMBAI: In the 12-month period, following the changes introduced by the UK regulators to reduce barriers for entry of new financial institutions, five new banks have been authorized out of which two are Indian.

Two banks from India - Axis Bank and Union Bank - are among the five new entities authorized to do banking business in the UK during the last fiscal, as per latest statistics released by the British regulators In the 12-month period, following the changes introduced by the UK regulators to reduce barriers for entry of new financial institutions, five new banks have been authorized out of which two are Indian.

The five banks authorised between April 1, 2013 and March 31, 2014 are Axis Bank UK Ltd, Union Bank of India (UK) Ltd, FCMB (UK) Ltd, UBA Capital (Europe) Ltd and Paragon Bank plc. Other Indian banks present in the UK include ICICI Bank, SBI, Bank of Baroda, Canara Bank, Syndicate Bank and Bank of India, among others.

As many as 30 new banks could open in the United Kingdom following changes introduced by the UK regulators to reduce barriers for entry of new financial institutions. There has been a substantial increase in the number of firms discussing the possibility of becoming a bank with the regulators, an official release said, adding in the 12 months to March 31, 2014 the regulators held pre-application meetings with over 25 potential applicants."


http://articles.economictimes.indiatimes.com/2014-07-09/news/51248236_1_union-bank-regulators-barriers
Edited by Bardon, 16 Aug 2014, 11:32 AM.
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Jimbo
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Why would this increase LTV to 125%?

Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Bardon
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Jimbo
16 Aug 2014, 11:38 AM
Why would this increase LTV to 125%?

Increased competition to give more credit out to borrowers, same as it ever was, it wont happen tomorrow but the writing is on the wall. These new banks will be lending to the next wave of canny property investors, one thing will led to another and presto 125% LTV in some form or another will re-appear.
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Jimbo
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Bardon
16 Aug 2014, 11:42 AM
Increased competition to give more credit out to borrowers, same as it ever was, it wont happen tomorrow but the writing is on the wall. These new banks will be lending to the next wave of canny property investors, one thing will led to another and presto 125% LTV in some form or another will re-appear.
So the macro prudential rules brought in by the BoE will not apply to these new banks?

http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/10985066/UK-mortgage-lending-falls-in-six-months-as-stricter-rules-bite.html
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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zaph
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Bardon
16 Aug 2014, 11:42 AM
Increased competition to give more credit out to borrowers, same as it ever was, it wont happen tomorrow but the writing is on the wall. These new banks will be lending to the next wave of canny property investors, one thing will led to another and presto 125% LTV in some form or another will re-appear.
Given govts provide an implicit guarantee to banks it's pretty irresponsible to allow a regulatory frame work that allows 125% LTV/LVR on standard lending. Or do you expect that implicit guarantee to vanish?

Bardon, you seem to know something about the UK bank/lending market - do they have similiar LMI standards as oz?

Why would a 'canny property investor' require a 125% loan?
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Bardon
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Jimbo
16 Aug 2014, 11:56 AM
The bankers are paid massive salaries and bonuses to find ways around regulatory hurdles, so yes they will develop new financial products that may be called something else and these new products will be the new weapons of mass destruction, that's the cycle same as it always was. Successful bankers don't sit around board meeting explaining how they cant make stretch targets due to red tape. By the time they devise a new 125% LTV Northern Rock will be a distant memory and land prices will be soaring anyway so it will be a no brainer.
zaph
16 Aug 2014, 12:02 PM
Given govts provide an implicit guarantee to banks it's pretty irresponsible to allow a regulatory frame work that allows 125% LTV/LVR on standard lending. Or do you expect that implicit guarantee to vanish?

Bardon, you seem to know something about the UK bank/lending market - do they have similiar LMI standards as oz?

Why would a 'canny property investor' require a 125% loan?
Think I answered most of your queries on the above post. I don't know the specific LMI requirement in the UK, it is the overall credit cycle that I am talking about here.

As for canny investors, just think five years from now in the UK, land prices are rising quickly across the board with no end in sight, a canny investor will want to fill his boots with other peoples money, same as the last time. This borrower will jump at the opportunity of a 125% loan, the latecomers to take out these products will get burned though, same as the last time.

I mentioned the famous Scot David Ricardo in my OP, it is his theory of economic rent that will apply in the future, under our current banking and land ownership systems, it has to. Another famous and living Scot was Gordon Brown ex UK PM who famously said "no more boom and bust" he will be proven wrong, the next boom that has already started will be bigger than the last one as will the resultant bust, Ricardo's time proven theory will prevail.
Edited by Bardon, 16 Aug 2014, 12:29 PM.
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Ned Flanders
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Bardon
16 Aug 2014, 12:12 PM
I mentioned the famous Scot David Ricardo in my OP, it is his theory of economic rent that will apply in the future, under our current banking and land ownership systems, it has to.
That assumes that trade can only occur on land. I think we have reached the point now where the economic rent extracted from the monopoly on land is large enough to create an arbitrage opportunity for trade that does not entirely rely on 'land'. Just for example, a drone could fly a package from a container ship, to a customs house, where a certain percentage of packages are inspected, or maybe all are xrayed, and then the drone flies on to it's destination. It is a little bit pie-in-the-sky, but not completely out of the realms of possibility. Expect massive regulatory resistance to these innovations.

The other way to arbitrage economic rent is the growing trade in information that can be sent over communications networks. Add to this greater mobility i.e. people can buy and sell information anywhere in the world that has internet, and so minimise economic rents paid, and you will start to see the "market solution" end to economic rent extracted from monopoly land control.

Maybe.
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" ... which is that all-too-familiar dynamic in Irish life where people tell lies, cover them up and create all sorts of collateral damage, sometimes spread out over decades, and never take responsibility."
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Jimbo
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Bardon
16 Aug 2014, 12:12 PM
As for canny investors, just think five years from now in the UK, land prices are rising quickly across the board with no end in sight, a canny investor will want to fill his boots with other peoples money, same as the last time. This borrower will jump at the opportunity of a 125% loan, the latecomers to take out these products will get burned though, same as the last time.

Considering the fact that the UK is well and truly fucked, why would anyone want to buy already inflated land?

The UK economy is on the ropes (in spite of the 3.2% expected growth for 2014/15).

They can't control their budget deficit, real wages are falling after years of stagnation, they have added 10 million to their population in the last 10 years where the previous 10 million took forty years, there is increasing racial tension, the trade gap is huge, private debt is massive and they net import 40% of the food required to feed their existing population.

Why would anyone want to buy land in the UK?
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Bardon
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Ned Flanders
16 Aug 2014, 12:53 PM
That assumes that trade can only occur on land. I think we have reached the point now where the economic rent extracted from the monopoly on land is large enough to create an arbitrage opportunity for trade that does not entirely rely on 'land'. Just for example, a drone could fly a package from a container ship, to a customs house, where a certain percentage of packages are inspected, or maybe all are xrayed, and then the drone flies on to it's destination. It is a little bit pie-in-the-sky, but not completely out of the realms of possibility. Expect massive regulatory resistance to these innovations.

The other way to arbitrage economic rent is the growing trade in information that can be sent over communications networks. Add to this greater mobility i.e. people can buy and sell information anywhere in the world that has internet, and so minimise economic rents paid, and you will start to see the "market solution" end to economic rent extracted from monopoly land control.

Maybe.
I have argued at length about this in the past with your view point and don't anymore as you can't escape it. The drones will need to be manufactured on land, with materials derived from the land, as will the container ship its fuel and it's cargo. The employees will require shelter on the land and food derived from the land, the water will need to be transported over land. Ricardos theory will ripple out from the drone network land focal points. Everything is derived from land, even water.
Jimbo
16 Aug 2014, 01:03 PM
Considering the fact that the UK is well and truly fucked, why would anyone want to buy already inflated land?

The UK economy is on the ropes (in spite of the 3.2% expected growth for 2014/15).

They can't control their budget deficit, real wages are falling after years of stagnation, they have added 10 million to their population in the last 10 years where the previous 10 million took forty years, there is increasing racial tension, the trade gap is huge, private debt is massive and they net import 40% of the food required to feed their existing population.

Why would anyone want to buy land in the UK?
The UK may not be to your liking but there are plenty of others that like living there and would like to live there.

These new banks that are establishing there obviously see a market for their credit. in my opinion they have had their correction as well.

Many people buy land there every day, they will also bid up the price of land with abundantly available credit as they move through the cycle. In 10 years time, current land prices in the UK will seem like peanuts.
Edited by Bardon, 16 Aug 2014, 01:36 PM.
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Ned Flanders
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Bardon
16 Aug 2014, 01:06 PM
The drones will need to be manufactured on land, with materials derived from the land, as will the container ship its fuel and it's cargo. The employees will require shelter on the land and food derived from the land, the water will need to be transported over land. Everything is derived from land, even water.

I don't disagree with any of that. Just that there is cheaper land than in the UK. There is no need to be based in the UK to trade with people in the UK.
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Ricardos theory will ripple out from the drone network land focal points.

Don't disagree with that either. But those focal points will be established where the land is cheapest. The economic rent is proportional to the level of monopoly. It is zero sum. Land prices will rise where they are low or close to zero (no monopoly), and decline where they are high (high monopoly, like port cities).
Overall, as long as the population grows, Ricardo's theory will hold true and land values will rise, but arbitrage of Ricardo's theory will distribute that value over greater land area, as long as the cost of geographic distribution is less than the current economic rent extracted through monopoly. That is what arbitrage is.
On the other hand, if global population goes into secular decline, which it will unless we replaced fossil fuels with some other type of cheap energy, land values will fall.
Edited by Ned Flanders, 16 Aug 2014, 01:51 PM.
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" ... which is that all-too-familiar dynamic in Irish life where people tell lies, cover them up and create all sorts of collateral damage, sometimes spread out over decades, and never take responsibility."
- Alan Glynn
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