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| Originally Posted by captainnemo The way banking works is not entirely relevant to the NR matter and it is absolutely true that none of the banks could meet their creditors' demands if even just private individuals turned up. Not a single High Street branch carries sufficient cash to pay out their local users if all turned up on say a Tuesday and wanted to pull the dosh and put it under the mattress.
Similarly it is true that the media inflamed the situation, footage of people queuing was unsettling and some of the comments from the panicking disinvestors made you wonder how they got the money in the first place.
Nonetheless, it doesn't need a degree in financial management to wonder quite how a situation as NR could be allowed to reach the position where what happened, happened. It is comforting that the Bank is in a position to shore things up (and other central banks are performing the same function) but it would be to all our benefit if the checks and balances were restored and maybe tightened.
The sub-prime market is the culprit, the genius idea of cobbling loans together for people who won't be able to make the repayments throughout the term. |
I'm still unsure of what particular point you are trying to make. After the sub prime issues in the States, UK banks decided to stop lending money to each other and this, combined with NR having to announce that they had arranged a credit facility (note FACILITY, not LOAN) and the media having a field day caused investors to start to withdraw and therefore creating a self fulfilling prophesy.
NR have a pretty solid business plan - they are one of the most innovative lenders out there and until the run occured, they had high cash liquidity.
ANY bank is days away from such an event - I can't see how it can be controlled. Banks are PLCs and are rightly allowed to run their own businesses as they see fit.
And to be honest, having financial qualifications helps understand this more than the average Joe
