Seven UK building societies in talks with the Bank of England
The Bank of England has this weekend confirmed talks with seven UK building societies amid concerns of possible knock-on effects from last week's Moody's debt rating downgrade. The seven rumoured to be in talks are Chelsea, Yorkshire, Skipton, Coventry, Norwich and Peterborough, Newcastle and Principality. While there is no suggestion that any of the above building societies are in any kind of financial trouble, with confirmation that they have all passed the FSA stress test, their participation in the bank's special liquidity scheme may be at risk.
This was a scheme introduced at the height of the credit crunch whereby financial companies were able to "swap" bonds and potentially toxic assets for increased liquidity. The rating of the bonds in question was highly influential in the amount of money they were able to lend and their ongoing participation in the scheme. After last week's across-the-board Moody's downgrade, a number of the bonds which are used as assets against increased liquidity have now seen their credit ratings fall.
This is a very difficult situation for the FSA, the Bank of England and the UK government to handle because if customers receive any indication of problems with these building societies then savings are likely to be withdrawn. This would have a significant knock-on effect to liquidity and financing arrangements for a number of building societies which could cause significant problems in the future.
Share this..
Related stories
Are retail sales about to crash in January?
The CBI's monthly survey has dealt a crushing blow to those looking for a sharp turnaround in the UK economy with a report that the sales balance fell to -8 in January from +13 in December. This monthly survey is an indication of how those in the industry have fared over the period, a period which has been impacted by the increase in VAT and the extreme weather in the UK. So what does this mean fo...
Read MoreIs the government playing more political games over Cadbury?
The Business, Innovation and Skills Committee Inquiry into Company takeovers, mergers and acquisitions in the UK has caught the attention of the financial press this week. Specifically, Business minister Ian Lucas has confimed that the government could intervene if a proposed £10.5 billion acquisition of Cadbury was seen to break existing competition laws. Whether the government would have any h...
Read MoreVodafone announces £1 billion of cost savings
It seems as though the need to cut costs has now spread to the mobile telecoms market with industry giant Vodafone announcing plans for £1 billion in cost savings. The group has suggested a rise in raw material prices and increased competition in the sector is the reason behind this cost-cutting programme and in line with the difficult market conditions revenue forecasts for the group (for the fu...
Read MoreCould UK base rates rise sooner rather than later?
Now that UK inflation stands at 3.4%, with wage rises well under 2%, there is speculation that UK base rates could start to rise sooner rather than later. But would an increase in UK base rates help the UK economy in the short-term? The only reason to increase UK base rates at the moment would be to reduce the threat of inflation even if liquidity in the UK consumer and the UK business arenas i...
Read MoreRecruitment firm negative on public-sector workers
Recruitment firm Ambition has certainly set the cat amongst the pigeons with a comment today that public-sector workers from the areas of accountancy and finance may not be welcome in the private sector. Rather controversially, the company believes that those in the public sector "lack the cut and thrust attitude" demanded by private sector businesses. But is this really the case? While the opi...
Read More