Last word on banking
Posted on May 2, 2008 by Richard Beddard
Filed Under Ramblings |
This paragraph stands out:
Whatever his problems, a banker is virtually obliged to maintain that his bank is totally sound until he has to close the doors. Any admission of difficulties will worry depositors and make them more likely to withdraw their money. So statements from bankers that everything in the garden is rosy must be treated with a large dose of salt. It may be true, but the banker would be equally obliged to say this if it wasn’t.
For now, at least, the market seems to be taking RBS’ assurances at face value. But with Michael Brett’s advice ringing in my years, its worth remembering the capital ratio is a solvency ratio and if the bank feels it needs to be more cautious in future to protect its depositors, it can’t be good news for profits. Maybe things aren’t any worse than Mr Goodwin says, but they’re unlikely to be better.
I wonder if the same could be said about central bankers.
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