UK banking bailout


#1

The details have been released - the BBC are saying upto £100bn may be the eventual total

news.bbc.co.uk/1/hi/business/7357880.stm

bankofengland.co.uk/markets/ … 080421.pdf

uk.finance.yahoo.com/currency/co … amt=1&t=1d

Bank shares are also sliding, I don’t think they are getting the terms that they expected (significant haircuts).


#2

From FT Alphaville


#3

Also from Alphaville:
https://alphaville.ftdata.co.uk/lib/inc/getfile/1108.jpg
The BoE are singing barber’s shop quartet tunes - the markets were expecting hot jazz and got have got the blues!


#4

So some AAA rated CMBS will see a haircut of 30%+. That’s hilarious.


#5

Indeed, and look at the haircut that’s being applied to gilts:
5.5% for 10-30 year fixed interest + 3% for currency risk!

Or for US GSEs on the same terms:
14% + 3% (currency) = 17%

And remember, these haircuts are all on top of the BoEs valuation (which is final), so if GSE paper is trading at 90% (as it was post Carlyle’s collapse), then the tradable value could be only 75% (at least I think that’s what the section below means!). As pointed out above, this is all AAA paper!