The British government has claimed this sale as something to celebrate, but I have real doubts about whether it is going to be of any real benefit to the British public.
Here are a few of the comments that have been made about this buyout......
Chancellor George Osborne said,"This is another step towards creating a new banking system for
britain that gives real choice to customers and supports the economy." ................................
The treasury also claimed this buyout , "... forms part of a raft of measures to reform the banking system and improve competition."
"The sale of hundreds of Lloyds branches to the Co-Operative creates a new challenger bank and promotes mutuals."
"This follows the sale of Northern Rock to Virgin Money in January and represents another important step towards a more competetive banking sector."
Some of the other comments made about this by the press include:-
"If this deal goes ahead it will see Co-op land a 10% slice of the U.K.'s high St banking pie. That's a sizable figure and will give them real clout as a main stream lender.....This could be a really significant development for small firms looking to restore traditional relationship banking, where the tick box lending criteria approach will hopefully have no place."
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Lloyds are currently 40% owned by the tax payer.
First of all, Lloyds were expecting £2 billion for this sale, but will actually only receive a fraction of this amount. It is actually going to cost a maximum of £750 million. Only £350 million will be paid initially. The other £400 million is to be paid over the next 15 years! But this mortgage payment is dependant on the success of the combined Verde Group banking business. It may never be paid.......................................................................................................................
Secondly, the Lloyds Banking Group has in recent years spent a lot of money on up-dating the systems running the banks. However, the Verde Group Banking business has not been updated to the same level as it is much the same as when Lloyds bought the banks. So the sold off banks are un-likely to be able to compete with banks that remain in the Lloyds Banking Group. This will pose a challenge to the claims made by the conservatives that this is going to bring in much needed new competition in U.K. banking. Im strugling to find reasons how this will happen.
Thirdly........The Lloyds Banking Group combined with the Verde Group Banks, which are about to be sold, amounts to many banks which the Lloyds Banking Group probably does not actually need. The reason being that, due to the continued stagnation in the housing market, many of these smaller customer friendly banks have become comparitvely redundant as far as the actual banks are concerned. What I mean is, although we need our local banks, to the big banks, the smaller banks have become more of an inconvenience. Because wages are generally paid in electronically, the banks know that our wages will still arrive even with a lot less banks in our towns and villages. When banks were giving out lots of mortgages they needed the local branches so they had a place so you could sign the papers for 25 years of debt for your dream home. However, until something revolutionary happens in banking, for many of us the idea of buying a dream home has long passed. For many, the idea of buying any delipidated shoe box of a home is a dream out of reach. I think Lloyds have calculated that they can concentrate on corporate buyouts and stock markets, without the need to hand out money to ordinary individuals. (No need to be too pessimistic. The whole point of this blog is that there is an answer, but it is un-likely to come from the big banks or the governments.......Not without a push from the people...). What I am trying to say is, the European rule which is forcing the sale of these banks by the Lloyds Group seems almost convenient for the long term Lloyds Banking Group. If they were not to be sold off, many probably would have been closed at some time in the future.
Forthly....... Probably one of the most niggling things about this deal is that Lloyds are going to remain as a kind of landlord to the Verde Banking Group banks.The Co-op is going to have to pay an annual commercial rate bill to the Lloyds banking group, expected to be many billions of pounds a year. Exact details are yet to be disclosed along with the management teams pay structure. For this reason there is little chance of the Co-op actually becoming competition for the Lloyds banking Group to worry about. Because if this was to happen, Lloyds could just increase the costs for the Co-op. So much for the much needed competition that George Osborne seemed so optimistic about.
Fifthly.........If I thought this was going to make a positive difference to the economy and make more home loans available to home buyers, I would be the first to recomend people to open an account with the Co-op bank. Regretfully I can not see this happening so I could not recommend people to start switching their account. The only way I can see this working is if the Co-op was to give stop gap loans whch are more profitable due to higher interest rates. This would work for the bank as they could take business away from 'money shops', log book loan companies and pawn shops. This certainly will not have any real benefits to the economy, as the only loans that make economic sense for the ordinary people is for loans to buy homes. However , I don't really see the Co-op as a competetive force to compete with the big banks. So the claims of George Osborne and the treasury on this buyout have little foundation to actually fulfil their claims. I hope I am proved wrong. Unfortunately, I don't think I will be.
Sixth.........Lloyds will continue the 'back office' work for the Co-op bank. This is likely to thwarte any adventurous new strategies, for example.........to start lending for home purchases instead of the mostly pointless speculation on the stock markets which has continued to thrive despite the recession. If the Co-op was to proceed with this 'new strategy' it would for certain bring in new account holders who are currently with other banks. But this change in direction could have affects on the stock markets which would be negative. A sudden rise in home loans would have a negative affect on the sacred stock markets. This would have a negative affect on bonuses of bankers, stock brokers and also a temporary affect on interest on various types of investment products that are predominantly linked with stock markets. It would also affect businesses related to the buying and selling of big business (buyouts). I know you are probably thinking that banks lending for home loans should earn bonusus just as easy as the stock markets.......No...Because home loans take a long time to get the money back........As much as 30 years.....Compare this to a corporate buyout of a large company.....It won't take as long to get the money back. Because the buyout business is an industry its self which is backed and supported by stock markets. When big business people buy businesses they will usually be hoping to sell them within a few years at a profit, to another business with another load of borrowed money.........Very similar to stock brokers and hedge funds buying shares of companies.......Again any money lent for this type of investment gets returned to the banks quicker to be used for the next investment. Lots of the bonuses the top bankers get comes from the success in these shorter term investments. If a bank can provide the finance for a buyout and then provide the finance for the next investor to buy the same company they make money from fees from both deals, but also early repayment fees etc. These buyouts provide lots of good for the bankers, but these buyouts do little for the rest of us apart from add a few pennies of interest to investments at the expense of higher costs for products and services we use and often job losses to make the savings to pay off the interest on the loan to buy the company!..
If account holders want the Co-op to lend money for mortgages, they are probably going to have to tell them that they require this as a condition of the account holder placing their money in the Co-op's banks. Failing that...It will probably need the forming of a peoples bank that does the things the people want. It could be the pheonix from the flames of David Camerron's big society ! Though I some how doubt that he would back this new peoples bank due to his completely biased relationship with people in the current international banking industry.- See "David Cameron has Worked Out What Caused the Economic Crisis !" in X-ECONOMICS.
Roll on the next building boom!
Here are a few of the comments that have been made about this buyout......
Chancellor George Osborne said,"This is another step towards creating a new banking system for
britain that gives real choice to customers and supports the economy." ................................
The treasury also claimed this buyout , "... forms part of a raft of measures to reform the banking system and improve competition."
"The sale of hundreds of Lloyds branches to the Co-Operative creates a new challenger bank and promotes mutuals."
"This follows the sale of Northern Rock to Virgin Money in January and represents another important step towards a more competetive banking sector."
Some of the other comments made about this by the press include:-
"If this deal goes ahead it will see Co-op land a 10% slice of the U.K.'s high St banking pie. That's a sizable figure and will give them real clout as a main stream lender.....This could be a really significant development for small firms looking to restore traditional relationship banking, where the tick box lending criteria approach will hopefully have no place."
--------------------------------------------------------------------------------------------------------------------------
Lloyds are currently 40% owned by the tax payer.
First of all, Lloyds were expecting £2 billion for this sale, but will actually only receive a fraction of this amount. It is actually going to cost a maximum of £750 million. Only £350 million will be paid initially. The other £400 million is to be paid over the next 15 years! But this mortgage payment is dependant on the success of the combined Verde Group banking business. It may never be paid.......................................................................................................................
Secondly, the Lloyds Banking Group has in recent years spent a lot of money on up-dating the systems running the banks. However, the Verde Group Banking business has not been updated to the same level as it is much the same as when Lloyds bought the banks. So the sold off banks are un-likely to be able to compete with banks that remain in the Lloyds Banking Group. This will pose a challenge to the claims made by the conservatives that this is going to bring in much needed new competition in U.K. banking. Im strugling to find reasons how this will happen.
Thirdly........The Lloyds Banking Group combined with the Verde Group Banks, which are about to be sold, amounts to many banks which the Lloyds Banking Group probably does not actually need. The reason being that, due to the continued stagnation in the housing market, many of these smaller customer friendly banks have become comparitvely redundant as far as the actual banks are concerned. What I mean is, although we need our local banks, to the big banks, the smaller banks have become more of an inconvenience. Because wages are generally paid in electronically, the banks know that our wages will still arrive even with a lot less banks in our towns and villages. When banks were giving out lots of mortgages they needed the local branches so they had a place so you could sign the papers for 25 years of debt for your dream home. However, until something revolutionary happens in banking, for many of us the idea of buying a dream home has long passed. For many, the idea of buying any delipidated shoe box of a home is a dream out of reach. I think Lloyds have calculated that they can concentrate on corporate buyouts and stock markets, without the need to hand out money to ordinary individuals. (No need to be too pessimistic. The whole point of this blog is that there is an answer, but it is un-likely to come from the big banks or the governments.......Not without a push from the people...). What I am trying to say is, the European rule which is forcing the sale of these banks by the Lloyds Group seems almost convenient for the long term Lloyds Banking Group. If they were not to be sold off, many probably would have been closed at some time in the future.
Forthly....... Probably one of the most niggling things about this deal is that Lloyds are going to remain as a kind of landlord to the Verde Banking Group banks.The Co-op is going to have to pay an annual commercial rate bill to the Lloyds banking group, expected to be many billions of pounds a year. Exact details are yet to be disclosed along with the management teams pay structure. For this reason there is little chance of the Co-op actually becoming competition for the Lloyds banking Group to worry about. Because if this was to happen, Lloyds could just increase the costs for the Co-op. So much for the much needed competition that George Osborne seemed so optimistic about.
Fifthly.........If I thought this was going to make a positive difference to the economy and make more home loans available to home buyers, I would be the first to recomend people to open an account with the Co-op bank. Regretfully I can not see this happening so I could not recommend people to start switching their account. The only way I can see this working is if the Co-op was to give stop gap loans whch are more profitable due to higher interest rates. This would work for the bank as they could take business away from 'money shops', log book loan companies and pawn shops. This certainly will not have any real benefits to the economy, as the only loans that make economic sense for the ordinary people is for loans to buy homes. However , I don't really see the Co-op as a competetive force to compete with the big banks. So the claims of George Osborne and the treasury on this buyout have little foundation to actually fulfil their claims. I hope I am proved wrong. Unfortunately, I don't think I will be.
Sixth.........Lloyds will continue the 'back office' work for the Co-op bank. This is likely to thwarte any adventurous new strategies, for example.........to start lending for home purchases instead of the mostly pointless speculation on the stock markets which has continued to thrive despite the recession. If the Co-op was to proceed with this 'new strategy' it would for certain bring in new account holders who are currently with other banks. But this change in direction could have affects on the stock markets which would be negative. A sudden rise in home loans would have a negative affect on the sacred stock markets. This would have a negative affect on bonuses of bankers, stock brokers and also a temporary affect on interest on various types of investment products that are predominantly linked with stock markets. It would also affect businesses related to the buying and selling of big business (buyouts). I know you are probably thinking that banks lending for home loans should earn bonusus just as easy as the stock markets.......No...Because home loans take a long time to get the money back........As much as 30 years.....Compare this to a corporate buyout of a large company.....It won't take as long to get the money back. Because the buyout business is an industry its self which is backed and supported by stock markets. When big business people buy businesses they will usually be hoping to sell them within a few years at a profit, to another business with another load of borrowed money.........Very similar to stock brokers and hedge funds buying shares of companies.......Again any money lent for this type of investment gets returned to the banks quicker to be used for the next investment. Lots of the bonuses the top bankers get comes from the success in these shorter term investments. If a bank can provide the finance for a buyout and then provide the finance for the next investor to buy the same company they make money from fees from both deals, but also early repayment fees etc. These buyouts provide lots of good for the bankers, but these buyouts do little for the rest of us apart from add a few pennies of interest to investments at the expense of higher costs for products and services we use and often job losses to make the savings to pay off the interest on the loan to buy the company!..
If account holders want the Co-op to lend money for mortgages, they are probably going to have to tell them that they require this as a condition of the account holder placing their money in the Co-op's banks. Failing that...It will probably need the forming of a peoples bank that does the things the people want. It could be the pheonix from the flames of David Camerron's big society ! Though I some how doubt that he would back this new peoples bank due to his completely biased relationship with people in the current international banking industry.- See "David Cameron has Worked Out What Caused the Economic Crisis !" in X-ECONOMICS.
Roll on the next building boom!
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