Toxic assets and their impact
While in theory many people may believe that toxic assets are just a short-term problem which will "go away" in due course, they could be in for a serious shock. In real life this is very much different because these toxic assets in many cases have formed the asset base of leading UK banks and financial institutions, which has allowed them to borrow more and more finance at better rates.
As these toxic assets effectively diminish their asset bases, many UK banks will see their finance costs increase because of the added risk and greater limitations on what they can borrow, again because of the reduced asset bases. What has in many cases taken decades to build up could quite literally be taken away in a short few months and take many banks back to their "pre-growth" days. As the Bank of England and the UK government step in to effectively insure these toxic assets they can then be taken into account when financial companies in the UK look to borrow money in the money markets. This should, in due course, allow them to turn around their businesses quicker than would normally have been the case.
Do not underestimate the power of toxic assets because they can literally take decades to recover from and seriously undermine the power and financial reputation of even the most reputable banking operations.
Share this..
Related stories
Be careful when transferring money from your bank!
It has been revealed that a number of people in the UK have experienced major difficulties reclaiming money which was sent to an anonymous bank account in error. It is vital that when sending money from your bank account to another account you ensure that all of the details are correct before pressing that "transfer button". What happens if you make an error?
A recent issue between...
UK retail sales rise 1.6% over Christmas period
While the headline figure with a 1.6% rise in retail sales over the Christmas period would normally make good reading for analysts and investors everything is not as it seems. Despite the rising figures, there was a 0.8% fall in the value of sales suggesting that steep reductions and excessive promotions have taken the wind out of the sails of the UK retail market.
As we have writte...
Have UK consumers returned from the dead?
In a reflection of recent upbeat statements with regards to the UK economy it looks as UK consumers are about to return from the dead. A report by the Nationwide Building Society showed the index of consumer confidence increased from 54 in May to 58 in June with many consumers apparently more upbeat about the prospects for the UK economy in the short to medium term.
When you conside...
Bank of England goes on the offensive
The Bank of England today invited a number of City analysts to a "teach-in" with regards to the UK quantitative easing program which will in the end see £175 billion injected into the UK financial system. A number of economic indicators over the last few days would seem to show that quantitative easing is not working, or at best having less of an impact than the Bank of England had hoped, somethi...
Read MoreUK Inflation remains constant in November
Official data has shown that there was no change in UK consumer prices inflation last month as it remains at 2.7%. According the Office for National Statistics; Cereals, fruit, bread and energy bills saw the most rapid increase in prices, whilst petrol prices fell 3p a litre to £1.35 and diesel dropped 1.5p to £1.42 a litre. Carpets, beer and plane ticket prices also saw a decrease in November f...
Read More