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Have banks been hiding their losses?
Originally posted by 5corpio
You may think that there is not much for which we should thank banks at the moment.
But it is striking that in the Great Recession of 2008-9, they put fewer businesses into insolvency under administration procedures and turfed fewer individuals out of their homes for failing to keep up payments on mortgages than might have been expected from their behaviour in previous recessions. They engaged in what bankers call forbearance - which is to vary the terms of a loan, when a borrower can't keep up the payments or breaches the conditions, rather than pulling the rug.
So, for example, in the case of mortgages where a borrower is at risk of falling behind on the payments, banks have frequently moved borrowers on to an interest-only basis, to reduce the size of payments.
And where the security of property underpinning a large commercial loan has fallen below a covenanted minimum, banks have resisted the temptation to seize control of the property - if they felt there was a chance the borrower could trade his or her way through the downturn.
To be clear, banks' help for struggling borrowers wasn't motivated exclusively by altruism. You'll remember they were under enormous political pressure not to evict families or contribute more than strictly necessary to rising......Read more HERE on this story
But it is striking that in the Great Recession of 2008-9, they put fewer businesses into insolvency under administration procedures and turfed fewer individuals out of their homes for failing to keep up payments on mortgages than might have been expected from their behaviour in previous recessions. They engaged in what bankers call forbearance - which is to vary the terms of a loan, when a borrower can't keep up the payments or breaches the conditions, rather than pulling the rug.
So, for example, in the case of mortgages where a borrower is at risk of falling behind on the payments, banks have frequently moved borrowers on to an interest-only basis, to reduce the size of payments.
And where the security of property underpinning a large commercial loan has fallen below a covenanted minimum, banks have resisted the temptation to seize control of the property - if they felt there was a chance the borrower could trade his or her way through the downturn.
To be clear, banks' help for struggling borrowers wasn't motivated exclusively by altruism. You'll remember they were under enormous political pressure not to evict families or contribute more than strictly necessary to rising......Read more HERE on this story