Tag: HBOS

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“Northern Rock risk revealed in 2004” | FT

Colin Henderson

It appears the weakness in the UK banks that showed first when the crisis hit, were foretold 5 years ago in a BoE simulation. Northern Rock risk revealed in 2004 | FT Banking regulators identified Northern Rock as the weak link in Britain’s banking system during secret “war games” held as long ago as 2004, the Financial Times has learned. The risk simulation planning, conducted by the Financial Services Authority, the Bank of England and the Treasury, made clear the systemic risks posed by Northern Rock’s business model, and its domino effect on HBOS, then the UK’s largest mortgage lender. Continue reading “Northern Rock risk revealed in 2004” | FT

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Disaster Myopia and other causes of banks’ problems

Colin Henderson

Andrew Haldane, Executive Director for Financial Stability, Bank of England diagnoses the failure of bank stress tesing in this speech given at the Marcus-Evans Conference on Stress-Testing.   He speaks of the Oct 87 crash, the LCTM hedge fund 98 failure as well as the 2007/8 crash. Why Banks Failed the Stress Test:  Bank of England pdf He sees three categories of failure: Disaster Myopia Essentially this is positive thinking that increases the longer since the last disaster.  He only somewhat jokingly wonders whether “10 years is the threshold heuristic for risk managers.” Network externalities He speaks of the financial system … Continue reading Disaster Myopia and other causes of banks’ problems