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Credit Crunch Over?

Posted on Monday, October 19, 2009

If you are looking to borrow money you will find it hard to believe that the credit crunch is officially over! That is not to say that everything is back to normal, but simply that interbank lending best measured by the three month libor rate recently fell to 0.55% versus a bank rate of 0.5%. That’s the good news.
 
However, this is probably as good as it is going to get for a while. The bad news for you the consumer, is that the rates being offered by banks on loans and overdrafts are at the highest levels relative to base rate probably in banking history.
 
This is all under the disguise of repairing balance sheets/meeting capital adequacy. Only banks could get away with such a move!
 
Only banks could react to the biggest PR disaster any industry has ever seen by dramatically increasing costs because they need to increase their own reserves. I am not convinced that our clients would let us get away with a similar trick!
 
Which reminds me of a joke I heard recently:
 
“Man robs a bank, man gets 10 years. Bank robs man, that’s a bonus.”
 
Colin Lawson
Managing Partner
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Equilibrium Asset Management (A Limited Liability Partnership) is authorised and regulated by the Financial Services Authority. For more information, please go to www.fsa.gov.uk.