Softening house market?

Have a look at AIB.

https://aib.ie/content/dam/frontdoor/investorrelations/docs/resultscentre/annualreport/2021/aib-group-plc-2021-annual-financial-results-presentation-3-mar-2022.pdf

Gross loan assets = 58.4bn

Other assets =70bn

financed by:

Customer accounts = 92.9bn

Maybe read the OP, what do you think?

While depositors might want a greater return on their deposit - I'd gladly take it as well the truth is the banks have more deposits then they can lend out. They can afford to let some of it flow out. So there's no need for them to overpay any more than that have to. Regardless the bulk of households savings tend just to sit there regardless.

deposits are not used directly in financing loans, as they are held as reserves, and banks cannot loan out reserves, banks simply create the credit required in loans, its effectively an accountancy activity, this has been confirmed by some central banks now, papers included

Makes sense, but how long do you think banks will backing the small guys (ones borrowing money) and telling the depositors (ones with the money) to sod off ? I guess one we will have to wait and see.

Some of the posters on here remind me of my sister when she was about 7. She put the coins from her piggy bank into a post office account and then was confused and a bit upset when she later withdrew the money to buy something and they gave her notes instead of "her money" back.

After the last two years I'll never say never but things do seem to have slowed. I rang around this weekend and there's houses for sale well over a month now with no offers despite having asking prices that would have been exceeded in a week back in March or so.

Asking prices are steady but I do wonder will the PPR show that actual prices achieved have slipped back by the end of the year? Basically while asking prices have changed little, earlier this year they were generally being comfortably exceeded whereas now they're being met or slightly exceeded.

Anyone else's experiences lately been similar?

NSFR is Net Stable Funding Ratio. It is in the Basel rules and has to be reported. It was brought in as, on a basic explanation, a measure of maturity mismatch. A bank needs to keep this ratio above a certain level as per requirement. The afformentioned LCR means that a bank has to have enough liquid assets to meet it's short term obligations. For the above, for example, they would be trying to make sure that there is not a liquidity crisis in the bank due to, for example, a run on deposits.

I gather you think that if a wealthy businessman puts 1m into a demand deposit account tomorrow that the bank will take that money and give out 4x250k 30-year mortgages the next day using the same money. That is not how it works. At a very simplistic toy example, if the bank gets loads of deposits, they are short term liabilities. If it them gives out all that money in 30 year mortgages, then those are long term assets. The risk is that the businessman, or all the depositers, arrive to the bank the next day to withdraw their deposits. You assets are long-dated so you won't have the money to pay them.

As poster said above, what a bank can lend and can't lend is based off a number of requirements such as capital requirements (Capital is broken down into three tiers if you want to get into more details but that is not relevant for here). Banks need to keep these capital reserves sitting there "just in case".

If the Bank wants to give out a load of 30 year mortgages, it will have to issue on some longer-date debt itself in order to make sure it has some security over it's future requirements. The short end of the curve is usually lower, but it can invert, or even spike in a time of crisis. I think that the overnight rate in Ireland was up over 10-12% around the time of the financial crisis for example. Banks are not allowed to leave themselves open to such risks. They don't want to hold capital there which is not being used as it is expensive (I can tell you all about KVA for derivative contracts and the difficulty modelling that if you want, but then again I think you need to study hard for a few years before we could even start to talk about that) so the regulators require them to do it.

Although not banking, one example of someone who was trying to pull a fast one in terms of reserves was a certain Mr. Quinn, which is why we all have to pay a levy now. He wasn't setting capital aside for the risks he was taking on and so he was saving loads of money, but the problem with that was that if the sh1t hit the fan, he wouldn't be able to cover the liabilities.

Very good you're learning to nearly make a valid point. But I'll call you up on a couple of issues:

The LCR and NSFR are designed to reduce excessive mismatch but not do away with maturity transformation... Again this is a banks business model. If it were implemented in the way you think banks would not exist.

Your example of a millionaire holding savings is fine but irrelevant here. It's been a broad increase in deposits across many households not just one rich bloke putting all his savings in. Banks are allowed to assume short term deposits are sticky where they have evidence to that effect.

I can understand why you use to work in derivatives. But even they seem to have tired of your cockiness and lack of understanding of a simple balance sheet. What do you think the banks are doing with the deposits?

This was was to do with the belief that a bank could just use the deposits it has to give out more mortgages. The thread being about the housing market and mortgage interest rates was brought up as an aspect of that. There was a view expressed that these would not raise due to them having loads of deposits earning 0%.

... And totally irrelevant for this thread for the reasons I stated. Musk hasn't just deposited his Twitter money in an Irish Bank, its an across the board increasing in savings so the vast majority of those funds could be loaned out again.

if they are not going up they'll have to fall with rising interest rates and inflation

It's not wasted time for you... Go back reread what you think you know about your funding ratios but this time pay attention. Your attention to detail is poor on that matter and also on here. For example, you somehow think I referenced AIB first - that was someone else.

These ratios are about reducing short/medium term liquidity mismatch and ensuring money is there to meet outgoings as they fall due. That's a world apart from saying banks don't fund long term lending with short term deposits. I'll say it again this is the basics of what banks (retail banks at least) do.

Rather than just attacking everyone else for disagreeing with you and spouting on about your self indulgent knowledge of derivatives, why not tell us all how - you think - mortgage lenders in Ireland fund their lending. Feel free to use the AIB example you seem fixated on. Now I know you'll have to throw in plenty of petty comments for the sake of your own ego but do try and also answer the question?

Comment all you like. Emphasize what you like. I never said it did. It is an example of one regulatory metric which banks have to hit. You can go off and spend a few hours googling something and come back with a shallow understanding of it all you want. But it is better to spend 5 minutes reading what you are attempting to reply to first.

Within the bank itself, you are going to have risk people knocking the heads of your ALM guys anyway.

The wannabe accounting geniuses above going on about balance sheets and saying that mortgage rates don't have to go up because they will fund all the mortgages off 0% deposits..........they ironically seem to discount that fact that discount rates are going to have a large impact on that side of the balance sheet.

We are back to the piggybank example. The other poster attached documents to explain the basics in relation to a retail bank such as AIB.

If you want to look at the balance sheet someone else posted, you can see that the answer in relation to where they get their longer term funding from. That is there - not to take in a euro and lend it out - but to have it as a capital reserve. Unlike deposits, that cannot be withdrawn on Monday.

I'm not wasting any more time on this. It's like trying to have a conversation with someone about the moon when all they are concerned about is telling you it is made of cheese. Go get yourself a job in finance.