http://www.telegraph.co.uk/fi
Quote:
Studying the figures provided by several large European and Asian banks, including British lenders such as Lloyds and HSBC, Barclays found that, on average, banks predicted a probability of default on their lending books that was 51pc higher than what they actually experienced.As comforting as this conservatism is, the worrying implication is that banks are rather poor assessors of their own risks.
After all, the primary function of creditors is supposed to be risk management, this seems to be the capitalist economic calculation problem in evidence: they're just guessing. Which in the light of this point:
Quote:
The ripple effects of Moody’s decision to downgrade Co-op Bank’s debt by six notches to “junk” status last month are still being felt, as some large depositors look to move their cash out of the bank. “You might not think much of the ratings, but institutions like local councils have a fiduciary responsibility to not leave taxpayers’ money in a bank where there are any questions about its solvency,” said one London-based banks analyst.
means that substantial effects can occur because of flighty responses to bad news (and rationally so).Frankly, I think the Co-op is going to get out of this intact:http://www.bbc.co.uk/news/business-22754201Suggests that the stake of the Bank of England in it will mean it will have to resolve any problems deliccately, but also means that the gap is being plugged by state fund (a very mutual solution).