tag:blogger.com,1999:blog-5613349802102193582.post4736394676216540287..comments2023-12-22T23:56:04.826+11:00Comments on Houses and Holes: Round one to regulators?David Llewellyn-Smithhttp://www.blogger.com/profile/01762856583909059662noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-5613349802102193582.post-10554532572008497812010-12-21T04:50:35.680+11:002010-12-21T04:50:35.680+11:00I would like to let you know what a joy it is to w...I would like to let you know what a joy it is to wake up each morning and read your delightful blog. I always feel as if you are speaking directly to me.plumbing supplieshttp://www.bes.co.uknoreply@blogger.comtag:blogger.com,1999:blog-5613349802102193582.post-76893842183650200272010-12-15T07:01:43.568+11:002010-12-15T07:01:43.568+11:00Some more clarification comes from Moody's:
&q...Some more clarification comes from Moody's:<br />"The introduction of covered bonds should help major banks diversify their funding and potentially to refinance their government-guaranteed bonds, which were issued during the crisis. There appears to be some overlap in the investor base for the two instruments and the proposed cap of covered bonds at 5% of total assets should provide adequate funding capacity. The banks may also be able to borrow more cheaply selling covered bonds than senior unsecured debt.<br /><br />At the same time, the low cap on covered bonds ensures that sufficient unpledged assets remain for covering the claims of unsecured creditors and depositors."<br /><br />This doesn't seem to help the Banks that much, at the cost of putting another creditor ahead of depositors.Peternoreply@blogger.comtag:blogger.com,1999:blog-5613349802102193582.post-23589290413603875802010-12-15T01:57:52.056+11:002010-12-15T01:57:52.056+11:00I disagree that increased competition was the caus...I disagree that increased competition was the cause of subprime crisis or what is happening in Australia. Any of the banks could have maintained a lower LVR and a safer balance-sheet. It is not like any of them had a gun to their head. When you have bank executives chasing bonuses, and politicians chasing votes, then you end up exactly where we are.<br /><br />I would like to see the RBA having tigher controls over lending rather than just a stupid cash rate. Banks should be treated as a borrower of deposits rather than a holder of deposits and be forced to maintain an LVR set by the RBA.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5613349802102193582.post-27263617929765899482010-12-15T00:00:14.299+11:002010-12-15T00:00:14.299+11:00I don't think there is necessarily anything wr...I don't think there is necessarily anything wrong with covered bonds themselves (they've existed in Europe for hundreds of years and have been pretty resilient). To protect depositors, in Europe their issuance is usually strictly capped to 4 or 5% of a bank's liabilities and the LVR of loans in the pool must be below 80%, etc.<br /><br />The issue is if you can trust our regulators to be similarly strict. Probably not, in which case perhaps they are not such a good idea...Financial Follieshttps://www.blogger.com/profile/18074060737860512595noreply@blogger.comtag:blogger.com,1999:blog-5613349802102193582.post-39640325379222083752010-12-14T21:12:31.997+11:002010-12-14T21:12:31.997+11:00I so happy that Admiral Stevens has finally come t...I so happy that Admiral Stevens has finally come to his senses on what is required for the economy.<br /><br />However I am still doubtful he will win in the end. All it will take is the introduction of covered bonds, and the game can be on again.<br /><br />Peter a discussion of covered bonds and why APRA banned them is <br /><a href="http://delusionaleconomics.blogspot.com/2010/11/here-comes-intervention.html" rel="nofollow">here</a><br /><br />Importantly<br />----<br />APRA wrote to all ADIs in January 2005 indicating its in-principle objection to covered bond structures that, in substance, subordinate the interests of depositors of ADIs to the interests of the covered bond holders. In APRA’s view, such structures are not consistent with the provisions of the Banking Act 1959 requiring that, if an ADI becomes unable to meet its obligations or suspends payment, the assets of the ADI in Australia are to be available to meet that ADI’s deposit liabilities in Australia in priority to all other liabilities of the ADI.<br /><br /><br />----<br />Can anyone explain what has changed that would now make APRA's view different ?Economic Delusionhttps://www.blogger.com/profile/05173440319556610007noreply@blogger.comtag:blogger.com,1999:blog-5613349802102193582.post-9343021548030404922010-12-14T20:23:08.801+11:002010-12-14T20:23:08.801+11:00A covered bond is a loan secured against a guarant...A covered bond is a loan secured against a guaranteed pool of assets (mortgages). <br /><br />The reason we haven't had them before is that in the event that the bank goes bust the guarantee is so strong that bond-holder has first right to sell the assets and recover his money. Including before depositors in the bank. <br /><br />That has until now been illegal in Australia because we have rather sensibly protected depositors first.David Llewellyn-Smithhttps://www.blogger.com/profile/01762856583909059662noreply@blogger.comtag:blogger.com,1999:blog-5613349802102193582.post-57351840028405151912010-12-14T18:55:27.161+11:002010-12-14T18:55:27.161+11:00David, would you be kind enough to explain what is...David, would you be kind enough to explain what is a "covered bond"? , and why they were not allowed in the past?<br /><br />Thanks,<br />PeterPeternoreply@blogger.comtag:blogger.com,1999:blog-5613349802102193582.post-70620803804430619182010-12-14T17:48:16.649+11:002010-12-14T17:48:16.649+11:00Or it could have been the discussion on Bubblepedi...Or it could have been the discussion on Bubblepedia about dropping these brochures in Wayne Swan's electorate ;-)<br /><br />homes4aussies.com/hpbroch.pdf<br /><br />The brochure drops commenced yesterday and a total of 21,270 of them will be deposited in mailboxes in the treasurer's electorate.<br /><br />The same brochures were delivered in Kevin Rudd's electorate earlier in the year.homes4aussieshttp://www.homes4aussies.comnoreply@blogger.com