Comments on: Interview With a Banker: The Truth About Banks and Lending

By: Grinling Gibbons

Grinling Gibbons — Thu, 26 May 2011 17:38:03 +0000

This is just what everybody knows i should think, & it is probably the same in all other countries that were bailed out by the banks, there should have been proviso,s put in place as to where the money was going, but it,s to late now the money has gone & it has helped know one only the banks, america is to blame for the whole bloody mess for removing what was put in place after the 29/30 Wall Street Crash & the banks around the world were only to glad to buy the worthless paper because all the could see was the Dollar Signs on how much they could make, but now as usual it,s going to be the same old cliche who picks up the tab yes you got it the working class guy in the street, & i bet this message will not be printed & just because i have the guts to tell it as it is,G K Gibbons

By: Alsherif W

Alsherif W — Wed, 07 Apr 2010 15:01:37 +0000

This is very similar if not identical to bank practices in Egypt, (regulated by the Central Bank of Egypt). Much publicity has been made in Egypt for avoiding the economic crisis by means of a very conservative banking system. However, the deposit to loan ratio in Egypt is as high as 65%! Growth is therefore very much dependent on FDI, which explains why the economy slowed down during the financial meltdown, despite having a very liquid banking system.

Alsherif Wahdan, Thunderbird MBA

By: Jaime

Jaime — Tue, 06 Apr 2010 21:56:46 +0000

That sounds like an extreme banking practice, however I can understand the rationale behind this. I work for an Australian Bank in commercial lending, a sector that was midly affected by the global financial crisis. In general most Australian banks performed pretty well as compared to their counterparts in other Western countries and as such there has not been a need to impose such extreme requirements on customers.

However over the last two years there has been an increased risk aversion towards commercial and residential property development loans because of the high level of credit exposure that most banks had. The lending limitations have been more related to stringent credit risk policies and to the quality of the securities provided by customers.

As a banker I must admit that Australian banks are as greedy as most banks in the world and they don’t miss any opportunity to squeeze more money out of their customers. That’s why most Australian people look at banks (and bankers) as crooks, something I’m not really proud about.

Posted by Jaime Neyra-Morales, Thunderbird MBA

By: ccurwick

ccurwick — Sun, 04 Apr 2010 01:00:19 +0000

Thank you for your comment Pascal. Nice to hear from other Tbirds on this topic. I’d be curious to hear how the banks are lending (or not lending) where you are.
Thanks for contributing.
C

By: Pascal Crepin

Pascal Crepin — Sat, 03 Apr 2010 11:38:47 +0000

I am not really surprised.
After what happened the banks are looking to preserve the remaining capital, rebuild their capital base before the authorities tighten the lending requirements. In order to rebuild the capital base, the only way is either to raise capital or not to renew outstanding loans. Typically, you would start to call in your overseas lending and then your lending to marginal (however defined) customers. Banks will look at their own survival first before thay can spare a thought about the survival of the community.

By: Kennon

Kennon — Tue, 23 Mar 2010 13:27:59 +0000

I think this is interesting from the stand point of how will these banks get the loans off the their books if very few can qualify for a loan under this 30% down? Will these loans go into default creating a short sale scenerio? Will the bank then have to devalue the property 40% or more to make it attractive to either another bank or Private lenders? There is a squeeze play for the cash holders if these community banks are willing to play.

By: ccurwick

ccurwick — Mon, 22 Mar 2010 21:36:26 +0000

MM,
Thanks for your comment. I agree with your thought about having a ton of cash on hand. I think that holding a large portion of cash in gold or other commodities is important. Rather than stuffing cash into a saving account, watching it devalue every year.

I also think the trend is moving toward private lending groups right now. Hopefully interest rates will tend downward in this area of lending and/or more private equity firms will emerge.

Private lending can have an excellent return on investment, if it is properly collateralized in this volatile market. Who knows what the future of the conventional side of lending (banks) is? Obviously the banking world as we all knew it has completely changed!! It is comforting to think that all will tend toward equilibrium again, sometime in the near future. However, lessons learned in banking, especially hard ones, are easily forgotten.
‘The shortest memory is that of the market.’ …..(and the banking system!)

Thanks for your thoughts.
CC

By: MM

MM — Mon, 22 Mar 2010 21:15:50 +0000

I thought this was a very interesting read and I walked away thinking “Ok…now what?”. So cash is king and you have to have quite a bit of it on hand even to get a loan on something that has a lot of equity in it, then what the point is a bank? Keeping a lot of cash on hand seems to fly in the face of Robert Kiosaki comment that ‘savers are losers’. It seems to me the only way to go about this is to either start creating your own ‘bank’ by creating a cache of precious metals that won’t loose value regardless of what the U.S. dollar is doing or gather a bunch of people together to go in on a deal with you (and in a sense create your own ‘bank’). Either way you still need quite a bit of forethought to pull something off and I hope most people realize this when going into a new venture.

Thanks for having this interview and posting it and thanks to your banker friend for being willing to talk about this stuff!

By: GQ

GQ — Mon, 22 Mar 2010 21:08:22 +0000

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