Friday, September 14, 2007

Bank run: is C&G next?

Has Cheltenham & Gloucester found a way to beat the liquidity squeeze?

C&G is Lloyds TSB Group’s specialist residential mortgage provider.

In August 2007 it wrote to borrowers informing them on “Important information about C&G mortgages”. The mortgage lender warned:

“Cheltenham & Gloucester plc, as you may know, has been part of the Lloyds TSB Group since 1995. What we’re planning to do is change who the ‘lender’ is for your mortgage. Today it is Cheltenham & Gloucester plc. From 1 October, it will be Lloyds TSB Bank plc.”
So what does the lender have to say about its new now-it's-with-us-now-it-aint mortgage?

“This change has been prompted by new international banking regulations which come in on (sic) 1 January 2008 (called the Basil II Accord).”

But has the lender been adding a little too-much Basel to the sub-prime lending stew in order to hide its US stake?

"Basel II is an effort by international banking supervisors to update the original international bank capital accord (Basel I), which has been in effect since 1988. The Basel Committee on Banking Supervision, on which the United States serves as a participating member, developed Basel II. The revised accord aims to improve the consistency of capital regulations internationally, make regulatory capital more risk sensitive, and promote enhanced risk-management practices among large, internationally active banking organizations. Revisions to Basel I-based rules also are under consideration."

The C&G move is due to be heard at the High Court on the 20th September.

No comments: