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The behaviour of the banks reminds me of the parable of the ungrateful servant:

The kingdom of heaven may be compared to a King who wished to settle accounts with his servants.
When he began the reckoning, one was brought to him who owed him ten thousand talents;
and as he could not pay, his lord ordered him to be sold, with his wife and children and all that he had, and payment to be made.
So the servant fell on his knees, imploring him, 'Lord, have patience with me, and I will pay you everything.'
And out of pity for him the lord of that servant released him and forgave him the debt.
But that same servant, as he went out, came upon one of his fellow servants who owed him a hundred denarii; and seizing him by the throat he said, 'Pay what you owe.'
So his fellow servant fell down and besought him, 'Have patience with me, and I will pay you.'
He refused and went and put him in prison till he should pay the debt.
When his fellow servants saw what had taken place, they were greatly distressed, and they went and reported to their lord all that had taken place.
Then his lord summoned him and said to him, 'You wicked servant! I forgave you all that debt because you besought me;
and should not you have had mercy on your fellow servant, as I had mercy on you?'
And in anger his lord delivered him to the jailers, till he should pay all his debt.So also my heavenly Father will do to every one of you, if you do not forgive your brother from your heart."

Finally a Bank that has done the right thing by going to the shareholders instead of the taxpayer.

Robert Peston, I think that your analysis of the economic situation and the various associated drivers is spot on, and that you are a fine journalist. But why do you have to deliver your spoken commentary in such an annoying, clearly affected manner of speaking? It is almost a parody of the type. You never used to speak that way, why do you do it now? It completely detracts from the message that you are trying to convey. Please speak normally, or at least as close to normally as television will allow!

I have not yet seen a coherent explanation of how this operational is supposed to work. Can anyone help?

1. When they 'swap' bonds for 'mortgage backed assets' is that the same as transferring ownership of each.

And if so what happens at the end of the year (or it is 3 years?). They will both reverse the swap?

If so surely the banks have to account for the future reverse swap too - which effectively cancels out the effect on the balance sheet of the first swap. So in what sense have the bank's balance sheets really been improved

Even leaving aside these accounting questions if the government is saying that the risk of default remains with the bank isnt that enough to say that the banks' asset and risk position has not actually been improved.

2. What is the BoE doing owning its own bonds anyway. If the BoE buys a bond in the market isnt it thereby cancelled? Or does the BoE keep on its balance sheet bonds which it owes to itself?

I have to agree with the comment from a small child about the affected and aggravating manner Robert Peston delivers his rhetoric on the worthy newstories of the rolling credit crunch crisis. So let's be absolutely clear here and try and do much better because never has anyone sounded quite so ridiculously pompous and verbose in getting over a message and loosing the content through speaking to the interviewee and viewers like naughty school children in a boring lesson of economics by a know it all teacher. My advice would be to stick to the backroom analysis and leave the frontline commentary to those who have the skill to deliver it.

So let me get this straight in my head. The Banks with their highly paid executives and investment advisers decide to make fast money in the US sub-prime sector and get this completely wrong. Isn't this just tough luck? If I decided to gamble most of my savings or my house away I wouldn't expect to be bailed out by another institution or my customers. The Banks seem to getting their cake and eating it, they've made huge mistakes and we're now all paying for it. I'm a laymen not a financial expert and maybe I see things a little too simplistically, but in my mind the Banks should never have been allowed to place all their eggs in the US sub-prime sector.

4. If I get a loan today. Tomorrow I will have capital to play with untill it needs to repayed. If I put the money to work and make more money my interest payments on the loan. I will have improved my balance.

2. If I understand correctly. The BoE 'literally' has a magic hat it pulls money out of in times of need. It's not exactly tax payers money, although in the end we will pay the equivalent in inflation, devaluation of the pound etc.. etc..
Unfortunately, from my POV, this is not meant to fix any problems. Just slow down their arrival (perhaps till after the next election)

Over the last few years I had been thinking I had got it all wrong and there really was some new paradigm, the product of some financial revolution which I had missed.

Yet the world has now changed back to something I understand and those who had adopted the new paradigm are going to have to change with it.

As a consequence I think necessity has concentrated a few minds at RBS. Others will follow in due course.

Those who don't change will be consigned like all revolutionaries to that well known cliche: the dustbin of history.

My mother used to have a saying: "You can have as much credit as you like, but sure enough one day the bill will come in".

How true.

Ask the banks just how deep into the Credit Default Swap market they are currently vested.

Subtract this figure from Β£50 billion.

Now change your underwear.

Thank you Mr. Peston for a most brilliant blog.

So basically, pretty much all the UK banks are insolvent?

And the government has acted via the BOE as lender of last resort to prop up a failed banking system, a taxpayer bailout by proxy?

Can we now have all our bank charges back, maybe all that extra cash will prop up the ailing retail sector and cushion the coming UK recession.
As for the young like myself, well Thankyou new labour for trying to keep the house price inflation miracle going, your giant ponzi scheme has denied me and my children a home we can call our own.

Remember the May local elections it will be the day labour get wiped out!

I think RBS is responding to a situation that many recent home owners (and especially BTL) are going to encounter i.e. don't commit yourself beyond your means.

I suspect RBS is going to be in a better position long term by doing this (assuming it actually gets the funds without its share price collapsing) than going down the goverment bond route (which is effectively just continuing the trend of making money out of debt).

I think we are all in for a big correction where the value of the economy is going to return to something much closer to the actual money supply. This is going to lead to a sharp fall in house prices (especially flats) and a rude awakening for the UK economy.

There was the possibility of a relatively soft landing for house prices around 2005 but the government/BoE decided to let it continue by cutting interest rates (ok only by 0.25%) which sent out the wrong message.

RBS are going about things correctly by approaching their own shareholders in a 'Rights' issue. They thereby admit their mistakes and moreover 'Pay' for them!!
The governments meddling by attempting to increase liquidity in the markets is aimed at getting them re-elected at the next election and nothing else. History teaches us that the markets find their own level, the sooner this is allowed to happen without interference then the sooner we can move on, opefully with the lessons learned firmly embedded in the operational mantra of the lending banks!

Still trying to understand what this means in practice. I havent seen a very clear explanation, but it seems to mean roughly that

a) The banks have (now) got illiquid loan assets they cant turn into cash - and nor can they borrow - so they cant lend money.

b) With this 'operation' the banks create some kind of liability (1 year or 3 years is not entirely clear- but with a repayment date) to the BoE. And on the asset side somehow they have also acquired Tbills (in a way has never been clearly explained by the media).

c) What IS clear is that they can now sell (or pledge) the Tbills for cash - which they can now lend out as mortgage loans once again.

d) But surely in 1 year or 3 years they will still have to pay back the liability to the BoE in CASH.

Which means they will either have to borrow again at that time - or they will have to sell the mortgages they have given in the meantime.

And if the markets have not unfrozen by then they will simply not be able to do that - so the taxpayer will be left with the mortgage loan baby. Even if they have demanded more loans than the cash the Bonds they have swapped them for, the BoE will have to get into the business of trying to recover the loans.

Or alternatively the government will also have to carry the loans to their maturity - and unambiguously write the whole operation onto the PSBR when it becomes obvious the banks wont have the money to buy them back again. (Actually in my opinion it is quite shameful that Gordon 'Enron' Brown doesnt show it as PSBR already now).

Is anyone convinced that all this is really a good idea??

3 years before all this shit hits the pan?

Is it coincidence that this is going to be soon AFTER the next election??

Robert, perhaps unwittingly, you 'said it all' in the first two lines of your posting.
The FSA has been asleep on the job.

Post 4. I'm no expert but I was told that the treasury bond would be acceptable as collateral for wholesale borrowing leading to retail lennding by the bank, whereas a mortage backed asset would not in the current climate. This is how this plan 'unfreezes' the markets either directly or indriectly. This could be wrong though.

Of course there are no guarantees that banks will use treasury bonds for this purpose and cynics say they may be used for some other more lucrative money making ventures favoured at present.

Nos. 3 and 5, please do not berate Robert. His slightly camp TV style is completely suited to the situation. It is the body language of irony.

Michael Wolfe and some of his colleagues at the ft write some brilliant pieces. But some would say their new-found wisdom is somewhat belated. Why did they not click in October what was going on? After all, economics is supposed to be their field.

Robert Peston is riding the wave, not sitting behind it. His strength is the instant assimilation of news and the agendas of the various participants. No other financial journalist in the UK seems to have such a quick reaction time. The longer he has this national TV platform, the better for us.

When he writes about the apparently innocuous event with a raised eyebrow, everyone else dissects it and fulminates, despairs or whatever the case may be. When he points to the tip protruding slightly above the waterline, just know that there is an iceberg below.

The only suggestion I would have is for the beeb to leave the longer pieces to Stephanie and let Robert do the ones calling for instant interpretation of breaking news. Fur might fly but viewership could soar.

We taxpayers have no money to help loan companies that are broke - already the poor are being asked for twice the amount of tax as before, thanks to Gordon Frown's latest escapade.

Therefore, I have asked for information on the size of discount used in the valuation of toxic bank assets used in the exchange. I should think an absolute maximum of 50p in the pound might give us the chance of some upside.

As yet, no one has volunteered an answer. Is this covered by the Freedom of Information act?

The government indemnity to the banks is surely a state aid for the purposes of EU competition law. Has the deal been notified to the European Commission? What have they said? Do they think EU approval should be contingent upon a root and branch reform to effect the de-cartelisation of the banking system in this country? Is not the absence of effective competition in EU retail banking the principal reason for current and continuing inefficiencies in the sector right across Europe?

I have to disagree with 3. and 5.

There are three things I really care about from a reporter; absence of bias; getting the facts right; and helping me to understand. Public speaking is never easy and as long as I understand what is being said I'm not going to complain.

Please leave Mr Peston alone. I don't want him wasting time practising a different speaking voice when he could spend the time researching and reporting real business news. In fact, come to think of it, why are we wasting blog space discussing this?

to #14 and #15...

The Fed has already tried this. The markets where impressed for all of about 24hours before deciding they were distinctly unimpressed and everyone went back into credit crunch mode as before.

This measure swops morgage debt for treasury bonds. However the banks have to take back the morgage debt in 1 to 3 years time. THe morgage debt remains.

It is supposed to be 'good' morgage debt, however, how much of it will have turned bad in the interveining months as a result of the growing economic slow down (we are not yet allowed to use the 'R' word yet). How much of it is rated AAA when infact its just so much shite (sound familar).

I would suggest the only proper route out of this mess is a full and frank disclosure by the banks (under emergency legislation if they wont do this 'voluntarily'). Followed by each each offering a rights issue as the first step to refiancing and only then being allowed to take up this bond swap facility. The pain must be 'privately felt' before it is 'publicly shared'.

Anyway, when the true multi-trillion dollar nature of the banks' Credit Dfault Swap losses start to be revealed it all won't matter.

I do so agree with those finding Robert's style of delivery annoying. It is so frustrating - I feel that he is trying to say something important, but my finger just has to go to the Mute button until its all over.

Robert you are probably letting off Sir Fred Shred Goodwin too lightly when you say they are keeping him to watch over the integration of ABN into RBS. Anyone can sort out that mess.

Instead, I think Mr King is at last addressing the issue of potential meltdown. He knows he cannot prick the balloons. Rather the reverse.

No, sorry. I will try again.

The balloons must release their hot air slowly, so we can have the softest landing possible under the circumstances. Therefore he has to encourage the existing shareholders of all the banks to pump in as much money as possible over a period of about three years.

Of course they will lose most of it over the next few years but hard cheese.

After three years most of the billions in mortgage loans will have reset and some of the trillions in credit swaps will be well down the revelation path. So we simply have to last until then at least.

The greedy and the gullible are two sides of the same coin. If he overtly nationalised the banks there would be no pickings for the greedy. With no greedies there would be no gullibles. The moment there were no gullibles, the price of houses would drop 35 percent. The game would be up. The share market would tank. Just like that. Rather let it happen slowly, over the next three years.

So Mr King has to keep the greedies in the game.

Now why will the shareholders continue to invest (ha ha, sorry) in the banks via rights issues? They will do so as long as they do not believe the above prognosis. They are lemmings. The behaviour of lemmings is well documented. But they need to follow what they think are leaders. That is, people who make a lot of noise.

Now this obviously has no bearing on Mr Goodwin or the next in line, the superheroes from Barclays. Nor the rest. But I still think Mr Goodwin will stay on for reasons other than you gave.

It has yet to be seen if RBS will raise the 12B. If there is a significant shortfall, well who knows what will happen. It is presumed that RBS has done its homework on the capital it can tap through a rights issue; but a rights issue of this size at a times of early recession and negative liquidity still butting around? It raises many questions not least the timing of the announcement and the timing of the most recent bailout-by-bond announcement from the Chancellor. I am not suggesting they are linked, but the coincidence should not go unremarked. The rights issue also signals any case anyone had any doubts that the thin capital lending model is dead for the foreseeable future. The knock on effects will see property fall, and industry innovation decline (and these are just two) but also the likelihood a jump in unemployment is highly probable - one of the reasons why a publicly backed guarantee of private lending has been tossed up on the table. The government insists on a very dangerous strategy. The unthinkable is that the RBS situation could end in tears but it is not improbable. Will the 50B from the Chancellor be enough to float the whole sector? Not a chance.

Sorry, post 18, Martin not Michael

Dwelling on matters such as bonuses paid to bankers and any political fallout (real or perceived) may be an interesting distraction over lunch - but it's not much more than that. The bonuses are paid and spent and anybody making the case that Labour losing ground (if they do) in upcoming local elections as a consequence of the "credit crunch" is doing just that - making a case. A better case could probably be made by invoking the removal of the 10p personal tax threshold - these things are barely measurable in the world of "why did you cast your vote?".

UK banks generate annually billions of pounds of profit (on which hundreds of millions of pounds of corporation tax is paid), employs hundreds of thousands of tax paying employees and, like it or not, as an industry sector is held in the highest regard around the world - meaning that investors from every country consider the UK banking sector as a relatively risk adverse investment.

You may not like how they do their business, you may think that their hold on financial power should be broken, you may think, for example, that unleashing the FSA dogs would be a good way of controlling the banks. Just be careful what you wish for - all of us, the banks, their directors, employees, customers, shareholders, we will all pay for their mistakes. If there is also tacit acceptance that what banks do next should be the consequence of yet more regulation, the price we ultimately pay will be far greater.

Is the rights issue 50% discount quite heavy? What is this saying about RBS?

Post 27. This may be one of many replies!

You seem to be suggesting that we turn a blind eye to the imprudence of certain of those in the banking sector to avoid paying an ultimately higher price. Many individuals are already paying the price in terms of lost jobs, repossessed properties, crippling mortgage payments. inability to get on the property ladder?

Exactly what higher price do you foresee as it may hold no fears for many?

I personally enjoy and relate to Robert Peston delivery. Whilst it may be a little laboured on occasion it has the important quality of honesty.

I am trying to think of another business that makes huge profits by grossly overcharging their customer, give extremely poor service, threaten the financial stability of every person and then be given a huge handout by the government without a single executive taking responsibility. The banking sector appears to still be an excellent industry to be in.

To clarify a couple of points raised here on post 11 and post 28.

Firstly on post 28, as this is the easiest to answer. To be honest it doesn't really matter what price the rights issue is at if all the shareholders take up the shares.

RBS has borrowed a lot of money and run down its reserves buying ABN Amro (how glad must Barclays be now!) which has opened up a large can of worms in the USA re loans that may or may not be recoverable. Hence the right down announced.

On a much larger scale than you and I would deal with effectively RBS has a few debts and is a bit short of cash. So what it does is it asks its current owners (the shareholders) to invest some more money to replenish things.

This would appear to be an alternative to the Government deal that has been discussed elsewhere. The assets of the bank are still worth the same and it is still owned by the same people but it now has more cash at hand and as there are more shares each share will be worth less.

If a company is worth Β£1 billion, for example, and has 100 million shares then each share should be worth Β£10. Effectively RBS has issued some more shares in return for cash. The bank is still worth Β£ 1 billion, using this example, but if there are now 110 million shares each share is worth Β£9.09. If all the shareholders have bought their shares each has the same percentage shareholding and thus the same amount of the company.

Post 11 the banks aren't insolvent! They just don't have much cash to lend. They have a large amount of assets tied up in property and loans that they cannot currently sell i.e. a mortgage book.

This is much like you or I having most of our assets tied up in our house, if we own one.

In the past the banks could package up these loans and sell them on and then relend out more money. With the drying up of credit no one is buying these debts. As such the banks have less to lend to you and I.

In line with classical economic theory a reduction in supply tends to lead to a rise in price hence the increase in mortgage rates and requests for more of a deposit. The banks have less to lend so are lending what little they have the the better customers with more of a deposit and more ability to repay by offering less of a multiplier of income.

If there is less money around to lend then people cannot buy and if new people cannot get on to the property market then you get a drop in demand for housing and hence a fall in the price of residential property.

The major concern is that if more money isn't made available to lend to buyers then price falls encourage more people to sell to get out whilst they can. This then causes a further fall in property prices and a vicious circle downwards.

Lets face it the banks have been rumbled and now they want a bail out from the tax payer.
Just as they have put unwarranted pressure on small businesses with collateral demands so too must the Bank of England and if that means no bonus or dividend payments then so be it.
The real problem is precedent, and what has happened has now opened the flood gates for every business to go to the government and the taxpayer for help.
The banks must pay fully for their errant ways, no one believes this 'rescue will work' untill all the off balance sheet dirt is fully disclosed. Failure to do so should be met with - if necessary- a jail term for fraud.
For sure bonus payments are off teh agenda for 3 years. Perhaps from that point we will finally be dealing with honest
people who really do put the paying customer first

It's simple.

We desparately need some new banks that will work with us to help grow the economy. The current crop have completely lost the plot.

The people of the UK and USA continue to blame the Banks and Governments for the current financial mess.
The governments attempted to treat their subjects like mature responsible adults, the people have failed miserably.
Driven by greed and fuelled by day time television property programs they have careered blindly into a morass of debt and they want the government to get them out of it.
The government is complying with this demand because the want to be looked upon an indispensable nannies.

Greed is fine it drives the world. It has got us this enviable standard of living. But greed must be measured and targetted. REMEMBER THAT THE NEXT TIME AROUND!

So having failed to pick up any early warning signs of the credit crunch before it happened, the FSA has now decided to monitor the health of the banks more assiduously than before to assure itself that the banks have enough capital to support their business plans. That even in hindsight is welcome news.

To raise the additional cash needed to shore up its capital to the new levels required, the people running RBS have decided to ask the shareholders to put in more money, in the form of a rights issue.

In doing so the people running the banks now appear to be taking the least difficult option available to them and without any risk to their personal wealth. Once they have ammassed the necessary funds I am confident that these bankers will soon be telling the rest of us how clever that initiative was and how they now deserve to paid even bigger bonuses than the ones they previously recieved.

My only hope is that this will not be allowed to happen.

Billions, schmillions, I've lost count. They survive every downturn but what about ordinary folk? Who speaks for us? There never were any 'safety nets' for small business but when your phone stops ringing because the whole system has gone pear-shaped what can you look forward to? The medieval process of insolvency!

Hurrah for the great and the good! I wish someone would tell people like me what to do! I own a small firm and this mullarkey is crippling it. Gifted Gordon and his 'stable macroeconomics! What tosh it all was! There seems to be an expectation that we can take everything they throw at us!

Get a grip man - and tell your country how to cope when the trade dries up! He may be called PM but he's still wearing the Chancellor's trousers. We need a leader at times like this, he should go the way of Chamberlain asap..



GC

Societies can only prosper when people are are able to believe in each others promises. Creditworthiness in a community is it's single most valuable economic asset, of far greater importance than any amount of raw material.
Not all promises are kept, of course but, within a prevailing climate of financial probity, failures are manageable because lenders can insure themselves by building risk premiums into their terms.
The ever present danger to prosperity arises not from unforseen events or even occasional reckless collective misjudgements but through the systematic corruption of credit. Dishonest borrowers are not at the root of the problem - no matter how fraudulent the intention dishonest borrowing will not corrupt an honest credit system: it is when the credit providers, for whatever reason, begin to take quick profits from advances that in their hearts they know are based on lies, that overall prosperity is put at risk of sudden, catastrophic collapse. The principal role of a central treasury is to be alert and eternally vigilant in the face of this permanent moral danger. For all his boasting about competence and possession of a moral compass, our erstwhile chancellor and supposedly the
chief guardian of honest credit has failed us utterly in this regard.

Why are RBS paying me a dividend (subject to tax) and then asking for the money back?

Apart from that, Im willing to take the pain.

Unlike in the case of Northern Rock when the mindblowing incompetence of the authorities sparked a bank run and then they nicked my shares.

The bubbles finally broken,
Its gone off with a bang,
We know weve all been swindled,
By the Canary Wharf Gang.
We may well lose our savings,
Our houses and our shares,
They couldnt give a monkeys,
Cos they're all millionaires.
They hope we have short memories,
And we are forgiving men,
So in 20 years time,
They can do it all again.

No. 11 Kirk Stephens. You are right of course, some big banks may be insolvent, but no-one can tell for sure.

These securitised packages they hold comprise slices of hundreds of dicey individual mortgages that are all but impossible to value before maturity. They are like lovely looking apples, all shiny and edible. It is known that many are filled with worms, but not which ones. And they are only allowed to be sliced open over the next three years.

So RBS have decided to mark down their own packages, that is, revalue them, at much lower than their face value. As a result, they will write off another 5.9b GBP. This is a colossal sum. Fortunately they did not spot this a few months ago at their year end when they declared several billion GBP profits. Otherwise they may have had to declare lower bonuses for their top traders and/or managers, who then may have walked out of the door. Shareholders may also have become concerned.

Apart from this 6b odd, they want to raise 12b in cash through issuing equity in the form of a rights issue. This gives their shareholders a chance to put in more cash. Then they want to sell about 5b in assets. That adds up to about 23b. That is probably enough to build the finest inter-city rail system in the world. Instead it will definitely help shore up the banking system. Even if it is only 1 percent of what will eventually be needed, it definitely does not come from the taxpayer. Three cheers for Mr King.

Anyway, this was all very sudden. RBS say it all has nothing to do with their recent little meeting with Mr King, but it may have only needed a nod and a wink.

Sorry, Post 11 is psmith 1967, not Kirk.

Post 32 Ian the Chopper. You are not perhaps related to Fred the Shredder, are you? You answered post number 28 possibly as a banker might have done, but I suspect Kirk Stephens wanted to understand the underlying issues.

A well priced rights issue creates a catch-22 situation for existing shareholders. Say there are x number of shares at a price of 10 GBP each. Then the company decides on a rights issue of another x number of shares but offers them at only 8 GBP each.

With half the shares priced at 10 GBP and half at 8 GBP, when they come together the share price initially finds equilibrium around 9 GBP.

When the company offers the shares, existing shareholders have first bite. They have the option to buy, in this case, one new share at 8 GBP for each one they already hold.

If they fail to exercise their option, their existing shares suffer dilution. That is, the share price has fallen to 9 GBP. So by not exercising their option their share holding drops in value by ten percent, just like that.

On the other hand, new shareholders are very excited. They bought at 8 GBP and the price has gone up to 9 GBP, just like that.

The greater the discount, the more new shareholders benefit at the expense of those existing shareholders who fail to exercise their option.

However, existing shareholders would tend to exercise their option. While they would lose 1 GBP per share on their existing shareholding they would gain 1 GBP per share on their new shareholding. Per share they would be in the same position. But they would have had to shell out a bundle of cash to protect their interests.

So it is a Catch-22 or a half nelson sometimes.

By the way, in general, the stronger the company the smaller the discount they will offer. There will be very little dilution to existing shareholders. So Warren Buffet would be able to price a rights issue at very close to 10 GBP if he ran the company in this example. Everyone would want a part of it.

Some believe that the amount of dilution is proportionate to the degree of desperation, but this is not necessarily the case.

To all those saying that I shouldn't criticise Robert Peston (post 3 above), let me remind you that I have no problem with the content of what he saying, and that I have stated that he is a fine journalist. My issue is with the way he speaks... a style that is clearly affected (i.e. "put-on"). Someone above said they were more interested in lack of bias and accuracy than having Peston learn a particular speaking style - I agree. I want him to speak naturally, not in the way he seems to believe he should, in the sing-song, high pitched, hyper-inflected and fake manner that he has adopted. As I have said, I think the content of what he says is fine, I just think that the style with which he says it is annoying. I pointed it out to my wife, and now that I have, she can't listen to him.

@25 regarding unemployment.
As a current RBS Insurance employee now facing an uncertain future with regards to a possible takeover, there's around 17,000 of us who are hoping any new suitor isn't one which prefers outsourcing it's contact centres abroad.

Why should the shareholders be made to pay for the Banks mistakes?
My son who is a full time student decided to buy shares with what he could borrow on his student loan. At the time I thought this was a wise decision as hopefully at the end of his studies he could sell the shares, make a profit and pay off his student loan. We're not a rich family and in fact he is the first member of our family to buy shares, so we don't have the Β£550 he must pay to keep his shares. If he doesn't pay up then he will lose all his shares. He is very stressed about it all and is even more upset because he talked his grandad into buying shares too. The stress of all this is going to make it very difficult for him to pas his exams.

Remember we all own a stake in the Banks through Pension Funds.

If you have a Private pension or Compnay Pension, it is highly likely that a sizable percentage of your Pension pot is invested in Banks.

So any damage to Uk Bank Share prices reduces the value of most UK Pension Funds.

Likewise, most Shares issued in a Rights Issue will be bought By Pension Funds and Insurance Companies investing your money.

So, before you cheer too loudly for the Banks discomfort, ask yourself where YOUR pension is invested.

I bet you don't know........

No. 46, I think a valuable lesson has been paid for.

No. 46
Shares are a "Share" of the company, company does well you do well company does bad, you lose.
This is precisely the kind of mistake people made in 1920's buy shares you can't lose... they all thought......Well you can and that is that.