Word: banking
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...Take Britain. Just as it did in Ireland and Spain, consumer confidence in the U.K. swelled in recent years on the back of rising housing prices. But in all three countries, red-hot housing markets have suddenly gone cold. With jittery banks slashing the range of available mortgages, and rocketing gas prices nudging inflation to 3.8% - well above the Bank of England's 2% target - demand in Britain's housing market has been choked. House prices fell 1.7% last month, according to Halifax, a major mortgage lender, and a total of 8.8% over the past year. That's hit Britain...
Exactly 12 months ago, as rival European banks scented the first whiff of danger in America's mortgage market, the Royal Bank of Scotland had other business in hand. As French, German and Dutch banks confessed to being hit by their exposure to soured U.S. sub-prime mortgages, an RBS-led consortium was closing in on its eventual $100 billion buy-out of Dutch rival ABN Amro, the banking industry's biggest ever takeover. One year on, and Britain's second-largest lender is still making news - though these days it's much less welcome. On August 8, RBS announced...
...Right now, it's a familiar place to many of Britain's banks. On August 7, rival Barclays added $5.4 billion to the enormous sums British lenders have written off amid the credit crisis; London-based HSBC, Europe's largest bank, made a similar contribution a few days earlier. For banks across Europe, as for their U.S. counterparts, 2008 is proving painfully difficult. Globally, banks could write down as much as $450 billion more over the next three to four years, according to research from Deutsche Bank. Lenders, it says, are short of funds equivalent to 4% of their balance...
...market, British lenders have in recent weeks begun squeezing their fixed-rate mortgages to lure buyers in. The government, meanwhile, is examining a temporary suspension of the tax paid by new buyers. What's really needed, though, is an interest rate cut. That's unlikely. On August 7, the Bank of England opted to hold rates at 5% because it's scared a cut will allow inflation to balloon further...
...most famous case, Banco Compartamos of Mexico was found to be charging a rate of over 100% on loans to their customers. In Cambodia, the annual interest rates are somewhere between 30% and 40%, which is still very large. As an outsider, these number may suggest that the banks are stealing from the poor to give to the rich, but a number of factors necessitate these high rates. The loans are risky, and the banks spend a lot on operating costs to distribute loans to peasants fanned out across the countryside. So even though the interest rates may seem exorbitant...