Dec 10, 2008
So, pinaguusapan pa rin natin buhay ko dito. Hehe.
Ironically, when we say let’s not speculate, that’s when we speculate. So might as well, speculate na lang such that we won’t be disappointed should the worse happen which should have been possibly foreseen by speculation, ironically. Hehe. Afterall, when there is heat there is fire. Para yang pag sinabihan ka ng “wag kang mabibigla”, nabigla ka na! Sarado na. Hehe. Joke lang po.
When a bank is failing, the general public will not know about it, in case you haven’t realized it yet. Because regulators DELIBERATELY keep a pending closure a secret to avoid the public from simultaneously getting their money out (or a bank run), to keep other options possible. Like the bank’s sale to another institution (say, Merrill Lynch to Bank of America) to avoid anymore government intervention (which is far more stressful) and bring back the confidence of the public or afford enough liquidity without the bank having to file for bankruptcy. Because, should all the depositors rush out of its door, I don’t think any buyer would want to take the deal anyway.
For many customers, the first time they know their bank has been shut down, it is when they walk to their branch and notice it’s closed. Or has read it in PMT. Hehe.
The problem with speculation is we tend to predict the future by looking at the past. Though we know, that past performance is not a predictor of the future, I think past data is far better off than a crystal ball. Thus, it is understandable.
However, let’s not forget that the 1930’s bank failure is both a cause and an effect of the economic crisis started off by the stock market crash. In addition to the collapse of confidence, reduction of money supply, high interest rates and reduced business investment. Their exact roles and relative importance in the debacle is what economists are disagreeing about.
Deja vu? Not quite. Our leaders and economists has put safeguards in place to avoid a repetition. They put social safety net in the form of unemployment insurance (or a paper bag given to our poor OFWs from Taiwan), Philhealth/Medicare, more active government role in economic policy, better regulation of the securities market, insurance of bank deposits, etc. . So if you ask me, not so similar with the Great Depression after all. Baka pwede pa Greater Depression. Hehe.
In the subject of banks – the combination of government oversight, competitive pressures, and improved risk - management has massively reduced the chances of large-scale bank failures. Bank failure happen in smaller institutions. Possibly because of a relatively reduced stability. Given their smaller capital, hence reduced liquidity not to mention higher interest rate.
In times, like this, when people are in panic, increased liquidity plays the utmost importance in keeping the bank steady. Fear and doubt is what will drive their depositors to withdraw every single penny. When a bank doesn’t have enough cash (because they are given out as loans), it will lead to a vicious cycle of more withdrawals, eventually running the bank out of capital to continue operation. But should there be enough liquidity, the bank can still carry on and eventually recover. And you get all you money back, plus interest.
Not sure though if it’s safe to assume that bigger commercial banks have higher liquidity compared to smaller rural banks. Well, relatively, I’d gamble with a yes.
To continue, it’s not just undercapitalization or a bank run that will cause a bank to fold. For all you know, the reason your bank closes is because of an increasing liabilities vs assets, or regulators have recognized fraud.
Yes, you are right that, now, nobody and nothing is invincible. But I’m definite some banks (and hopefully everybody) will turn out to be indestructible in the end. E san na natin ilalagay ang ating pera. Seriously? Hehe.
Clue, we are an emerging economy. Just as wealth is unequally distributed. So is the risk.
So, pinaguusapan pa rin natin buhay ko dito. Hehe.
Ironically, when we say let’s not speculate, that’s when we speculate. So might as well, speculate na lang such that we won’t be disappointed should the worse happen which should have been possibly foreseen by speculation, ironically. Hehe.
Afterall, when there is heat there is fire. Para yang pag sinabihan ka ng “wag kang mabibigla”, nabigla ka na! Sarado na. Hehe. Joke lang po. When a bank is failing, the general public will not know about it, in case you haven’t realized it yet. Because regulators DELIBERATELY keep a pending closure a secret to avoid the public from simultaneously getting their money out (or a bank run), to keep other options possible. Like the bank’s sale to another institution (say, Merrill Lynch to Bank of America) to avoid anymore government intervention (which is far more stressful) and bring back the confidence of the public or afford enough liquidity without the bank having to file for bankruptcy. Because, should all the depositors rush out of its door, I don’t think any buyer would want to take the deal anyway.
For many customers, the first time they know their bank has been shut down, it is when they walk to their branch and notice it’s closed. Or has read it in PMT. Hehe.
The problem with speculation is we tend to predict the future by looking at the past. Though we know, that past performance is not a predictor of the future, I think past data is far better off than a crystal ball. Thus, it is understandable.
However, let’s not forget that the 1930’s bank failure is both a cause and an effect of the economic crisis started off by the stock market crash. In addition to the collapse of confidence, reduction of money supply, high interest rates and reduced business investment. Their exact roles and relative importance in the debacle is what economists are disagreeing about.
Deja vu? Not quite. Our leaders and economists has put safeguards in place to avoid a repetition. They put social safety net in the form of unemployment insurance (or a paper bag given to our poor OFWs from Taiwan), Philhealth/Medicare, more active government role in economic policy, better regulation of the securities market, insurance of bank deposits, etc. . So if you ask me, not so similar with the Great Depression after all. Baka pwede pa Greater Depression. Hehe.
In the subject of banks – the combination of government oversight, competitive pressures, and improved risk - management has massively reduced the chances of large-scale bank failures. Bank failure happen in smaller institutions. Possibly because of a relatively reduced stability. Given their smaller capital, hence reduced liquidity not to mention higher interest rate.
In times, like this, when people are in panic, increased liquidity plays the utmost importance in keeping the bank steady. Fear and doubt is what will drive their depositors to withdraw every single penny. When a bank doesn’t have enough cash (because they are given out as loans), it will lead to a vicious cycle of more withdrawals, eventually running the bank out of capital to continue operation. But should there be enough liquidity, the bank can still carry on and eventually recover. And you get all you money back, plus interest.
Not sure though if it’s safe to assume that bigger commercial banks have higher liquidity compared to smaller rural banks. Well, relatively, I’d gamble with a yes.
To continue, it’s not just undercapitalization or a bank run that will cause a bank to fold. For all you know, the reason your bank closes is because of an increasing liabilities vs assets, or regulators have recognized fraud.
Yes, you are right that, now, nobody and nothing is invincible. But I’m definite some banks (and hopefully everybody) will turn out to be indestructible in the end. E san na natin ilalagay ang ating pera. Seriously? Hehe.
Clue, we are an emerging economy. Just as wealth is unequally distributed. So is the risk.
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