All bankers are wankers – discuss.

[Cousin Jack]

Does Fractional Reserve banking need a serious overhaul, or just massively tighter regulation? Recent events have shown that not all is well in the land of finance, indeed the smell of rotten fish is becoming quite overwhelming.

Did bankers really not anticipate that bank rates could rise, and rise rapidly? FFS, do they not have a collective memory that can realize that within living memory bank rates were up in 2-digit territory, and that the recent very low rates were an aberration that was unlikely to last?

Do they not remember 2008, where massive problems because they failed to recognize commonality of risk? Last time around it was crap mortgage bundles, this time it is US Govt stock, and customers.

Do the Gnomes of Zurich have a clue? Equity is risk, bonds, even AT1 bonds, are less risky. Unless of course the aforesaid gnomes decide that keeping Saudi equity holders happy is much more important than any normal rules.

Is it all going to stop, or is this the start of a slow-motion financial crash?

Time to insist that near 100% reserves are necessary to get a banking licence? Yes that will cause considerable pain, but the end result might be a sustainable industry that is not prone to shooting itself (and us!) in the foot ever few years.

Or any other solutions? I am sorely tempted to swap my cash for a bag of gold, the real shiny stuff. Even bankers cannot screw that up (although Gordon Brown tried his best).

[demographic]

Can I be the first to point out that it's not Gremlins fault, he's not that type of banker.

[Yorick]

Can I be the first to point out that it's not Gremlins fault, he's not that type of banker.

You haven't met him

[demographic]

Can I be the first to point out that it's not Gremlins fault, he's not that type of banker.

You haven't met him

True...

[Screwdriver]

...and I haven't met all bankers so I hesitate to comment.

The system is flawed, there is an end game where, like Monopoly, somebody ends up owning everything. That is what is being played out here and if the rules allow bankers to make more profit betting on riskier investments they will. Especially if they are "too big to fail" and the taxpayer gets to bail them out.

I sometimes also have to remind myself I live in a decent house, have a workshop + garage full of toys and a lot of that is because the banking system serves to keep us all afloat. It would be nice if it was more fair (more equitable perhaps) but since the people who decide what is and isn't fair are the same people who are making the money, they're hardly going to vote themselves out of pocket...

It's just the ways things are, could be worse (probably will be)...

[Cousin Jack]

Cars - all bought for cash
Bikes - ditto
Current house - mortgage free
Credit cards - all paid in full every month
Debt - zero

I'm one of the people providing the money for bankers to gamble away, and I am not happy.

[DefTrap]

If there was no credit / mortgage facilities then presumably few of us would be able to afford to purchase houses outright. But then also presumably house prices would be also drastically lower because of drastically reduced speculation. And then also presumably presumably the quality of the housing stock would be typically terrible. So relatively cheap shitoles. Sweet.

Lots of presuming I know but the outcome sounds kind of turgid.

Of course if what we're saying is you could work your arse off without credit to get to a position where you can exploit the lazy and unfortunate who stayed dirt poor then I guess I'm good with that

[Cousin Jack]

I am happy with credit, sensible credit. Prove you can be trusted with a bank a/c, then you will get trusted with a credit card. Prove you can afford a mortgage by saving £x per month for a year and you can have a mortgage with repayments roughly at £x pm.

However the kiddies have been let loose in the sweet shop, unaffordable credit is rife, and people look on going bankrupt as a lifestyle choice.

[Cousin Jack]

Bankers used to be cautious chaps, keen to make sure the money they loaned out would be repaid on time. Now the same retail banking function is done by a salesman who is targeted on selling £x million of loans. When times are good they will even sell you a bigger loan to allow you to repay the unaffordable loan you cannot afford to pay back.

As for the tradi.ng function, they are a load of wide boys playing a zero sum game. For every winner there is a loser. That fact seems o have escaped their attention

[mangocrazy]

Cars - all bought for cash
Bikes - ditto
Current house - mortgage free
Credit cards - all paid in full every month
Debt - zero

I'm one of the people providing the money for bankers to gamble away, and I am not happy.

LIkewise, exactamundo. Financial prudence starts at home, for some of us, at least.

[Mr. Dazzle]

Only debt I have is my mortgage. My car is leased through work, under normal circumstances that'd be a loan but it only kinda is.

I'm not even a grumpy old git either!

I don't look down on people for 'buying stuff they can't afford' because they've got loans. Loans are a wonderfully useful thing, they exist for a reason. I don't even think making profit from financial services is necessarily evil...it's what allows me to have a roof over me head (and most of you too, at some point in your life).

I do feel like some kind of better regulation is required. Buggered if I know what it is

[Cousin Jack]

If I was a banking overlord I would make 2 rules.

A minimum of 50% of deposits have to be kept in cash reserves.
Trading can only happen with cash raised from specific high risk trading bonds, and that includes leveraged derivatives, ie only trading bond holders can lose their shirts, no matter how big the trading loss.

Banks can set up foreign companies to play on the world stage, but UK banks have to follow my rules or no UK banking licence.

[MyLittleStudPony]

Enforce The Sharia!

[Cousin Jack]

I don't disagree with any of that, but the problem (IMHO) is the amount of leverage, or to put it another way, the ratio of your risk versus the cash you have available.
Leverage is what causes the damage.

Put very simply, you can drive a billion dollar car on minimum wage as long as the finance gets frigged enough to allow it.

When you can speculate with a fraction of the total sum you can trade in derivatives that have massive liabilities but you've only put down a fraction, you can trade in equities with huge leverage and risk margin calls, etc.

When it goes wrong no one can settle their bills, the system collapses, the man in the street wonders where his pension money has gone.
It's now gone even beyond that though, the governments just print more and hand it back out.

Leverage has become a massive problem. The answer is to treat leveraged 'investments' as gambling. Gambling debts, where the bookie allows you to bet on credit, are unenforceable in law. Bookies are not stupid, they make you pay up front. Markets would soon do the same, bet on a derivative where, if it does all go Pete Tong, you will owe £100M they ask for the £100M up front.

[Mr. Dazzle]

Only debt I have is my mortgage. My car is leased through work, under normal circumstances that'd be a loan but it only kinda is.

Just on this point...

It seems that having my car on credit has actually boosted my credit score Previously I was hovering just below maximum on all the usual scoring systems. I hadn't really changed my borrowing situation for several years.

Getting that loan for my car has actually pushed me to 100% score across all of the big scoring systems. They've all just updated for the March period and been revised upwards.

Anyone wanna lend me some money? Crazy (but also kinda not) how borrowing money makes you a better lending prospect.

It does kinda speak to the points above though, borrowing money is super simple now. I'm not sure I'd say easy but I suspect it'd take me a matter of minutes to borrow enough to make the monthly payments the same as my income, were I foolish enough. Probably wouldn't even have to speak to anyone.

[Count Steer]

Only debt I have is my mortgage. My car is leased through work, under normal circumstances that'd be a loan but it only kinda is.

Just on this point...

It seems that having my car on credit has actually boosted my credit score Previously I was hovering just below maximum on all the usual scoring systems. I hadn't really changed my borrowing situation for several years.

Getting that loan for my car has actually pushed me to 100% score across all of the big scoring systems. They've all just updated for the March period and been revised upwards.

Anyone wanna lend me some money? Crazy (but also kinda not) how borrowing money makes you a better lending prospect.

It does kinda speak to the points above though, borrowing money is super simple now. I'm not sure I'd say easy but I suspect it'd take me a matter of minutes to borrow enough to make the monthly payments the same as my income, were I foolish enough. Probably wouldn't even have to speak to anyone.

A few years ago I went for the interest free deal on some kitchen stuff. (Bit of a no brainer). The sales chap came back and said 'We have a problem...you don't exist!' He'd looked on their credit system and I'd only ever had a mortgage - so I wasn't there. I guess it's all hooked up a bit better with the banks/CC companies etc now.

[Cousin Jack]

I have 3 credit cards in my name, I can spend (and borrow) £37k with zero effort, and top up with another £5k on a 4th card where my wife is the main cardholder. A few years ago the credit limits were even higher, AND I had more cards. However that isn't really the problem, people like me and you don't use credit UNLESS we have a coherent plan to pay it back, and a back-up plan in case plan A goes tits up.

An awful lot of people max out a CC with no idea how they will ever repay it, they just hope they can keep servicing the debt. And then something happens, and they can't.

[Count Steer]

I have 3 credit cards in my name, I can spend (and borrow) £37k with zero effort, and top up with another £5k on a 4th card where my wife is the main cardholder. A few years ago the credit limits were even higher, AND I had more cards. However that isn't really the problem, people like me and you don't use credit UNLESS we have a coherent plan to pay it back, and a back-up plan in case plan A goes tits up.

An awful lot of people max out a CC with no idea how they will ever repay it, they just hope they can keep servicing the debt. And then something happens, and they can't.

I have one bank CC now (+Amex) and I'm letting that one go too (keeping the Amex). With on-line banking it's easy to shift cash out of savings/ISAs etc, on the spot, into current and pay that way.

I do think it was a shame that lots of Building Societies got converted and absorbed into the banks though. (I still use two of the ones that resisted). I wouldn't bundle them into the bankers/wankers bucket.

[Mr. Dazzle]

Irony here is, some years ago when we got our windows done I wanted to pay on CC. Just cause I get cashback and on a whole house of double glazing that's non trivial!

My CC limit was about 700 quid short of the total bill, so I called em up and asked for a temporary lift. No dice. So I just put the cash on my CC first then paid for the windows.

Month later....they upped my limit by 2k, probably because I'd done a big transaction and paid it off.

[MingtheMerciless]

If I was a banking overlord I would make 2 rules.

A minimum of 50% of deposits have to be kept in cash reserves.
Trading can only happen with cash raised from specific high risk trading bonds, and that includes leveraged derivatives, ie only trading bond holders can lose their shirts, no matter how big the trading loss.

Banks can set up foreign companies to play on the world stage, but UK banks have to follow my rules or no UK banking licence.

I'd have a flogging post on the trading floors, for those that are inept, greedy or corrupt.