The decision of the Dutch government to put more capital into ING is strange. A week ago when ING took on deposits from a failed Icelandic bank,and on October 17th in a press release, we were told that ING was in a strong financial position. Now we are told it will have extra taxpayers capital. The governments and Regulators have raised the bar over how much capital a bank should have, and are now having to pay up to meet their own higher hurdle to appease the markets. Meanwhile a French bank loses substantial sums in “unauthorised trades” so the three bosses of the bank resign. One wonders why the top people have to resign at a bank if employees broke the rules, but not at all the banks which got into financial difficulties by doing what the Directors asked or authorised.
It is good news that many in the political and media classes reckon we have now lived through the worst of the banking crisis and think it is now all on the mend. A return of confidence in banks is a necessary part of recovery for the rest of us. However, the authorities have to understand that you cannot have strong banks without a stronger economy. They need to do more to ease the recessionary forces, otherwise banks will face much larger losses right across their portfolio of loans. The issue now is whether we can stave off a corporate loan problem to run alongside the sub prime mortgage problem being experienced on both sides of the Atlantic.
It is also worrying that the main property specialists, who were very complacent going into the housing downturn, forecasting a very shallow decline in prices, are all now telling us to expect another year of substantial falls in UK house prices. If they are right this time round that means more grief on the mrotgage books for the banks, as well as many individual tragedies as the nation plunges more into negative equity.