Covid Mortgage Bomb Is Going To Explode

[Brewster67]

Virtually all my wife's extended family have taken mortgage holidays over the past 15 months of Covid. Even those whose earnings were not affected.

 

I opted not to take one because the bank said that monthly interest is still going to be added to the principal and that interest is going to be compounded every month increasing the principal exponentially.

 

Many Thais are soon going to be trapped in mortgages they won't be able to afford to pay if this lasts as long as I think it is going to last. that could see many lose their property to the banks.

 

If as I suspect this drags on for another 18 months or so, and people have been on a mortgage holiday since the start, (assuming the average rate of 7%) then their monthly mortgage payments are going to shoot up by at least 25% and many are going to find themselves completely over-leveraged.

 

I hope for the sake of many, that the government steps in and orders the banks to remove the interest over the covid period, because mortgage holidays were supposed to help the poor, not increase the profits of the banks at the expense of the poor.

[scubascuba3]

Banks have hidden big losses on their balance sheets, I wouldn't be surprised if there's a run on one or more banks eventually

[Brewster67]

29 minutes ago, scubascuba3 said:

Banks have hidden big losses on their balance sheets, I wouldn't be surprised if there's a run on one or more banks eventually

Fractional reserve lending is going to be a killer here. When you create 90% of the lending cash from thin air and collateralize just 10% of it then the borrower stops paying, then you can't pay down the uncollateralized debt on the balance sheet. then the bank slips into insolvency territory. So yes, I agree.

[Sydebolle]

So it is real estate shopping time anytime soon again ......... and never forget, the bank can and will auction off foreclosures at the remaining balance of a loan. I take it that some good deals are snatched up by the wealthy few - as always ......... 

[NotYourBusiness]

Yes. I know you are talking about Thailand here, but it's similar to what's happening in the USA. Now, we must understand that the Federal Reserve employs just over 400 PhD economists.

 

https://www.federalreserve.gov/econres/theeconomists.htm

 

Does anyone think that what you have described here is not known to them? This will not end well. I hope I am wrong.

[bert bloggs]

On our estate the bank has had a house for sale for 29 million for years,i reckon as it deterirates its value now is 8 million tops 10 when it was first put on the market,so go figure,how many more like this do the banks have?

[LittleBear57]

41 minutes ago, bert bloggs said:

On our estate the bank has had a house for sale for 29 million for years,i reckon as it deterirates its value now is 8 million tops 10 when it was first put on the market,so go figure,how many more like this do the banks have?

The bank too have some on our estate falling into disrepair with an artificial price tag. It's time they got their act together and sold realistically or auctioned of and cut their losses.

[newnative]

50 minutes ago, bert bloggs said:

On our estate the bank has had a house for sale for 29 million for years,i reckon as it deterirates its value now is 8 million tops 10 when it was first put on the market,so go figure,how many more like this do the banks have?

    Same at my condo project.  A bank has a condo on the lowest floor, unfurnished and in need of renovation, and with one of the worst seaviews.  It has it priced higher than some identical, higher floor nicely furnished units with much better seaviews.  Been unsold for years.  

[Brierley]

19 hours ago, scubascuba3 said:

Banks have hidden big losses on their balance sheets, I wouldn't be surprised if there's a run on one or more banks eventually

If they are hidden, how do you know?

[Brierley]

18 hours ago, Brewster67 said:

Fractional reserve lending is going to be a killer here. When you create 90% of the lending cash from thin air and collateralize just 10% of it then the borrower stops paying, then you can't pay down the uncollateralized debt on the balance sheet. then the bank slips into insolvency territory. So yes, I agree.

Capital Adequacy is only as good as the central bank that overseas it. The percentage of deposits that can be loaned in that manner is regulated by the central banks, liquidity is also regulated according to Basel I, II and III. Additionally in Thailand BOT adds its own percentage on top of the Basel protocols. As I recall, Tier I liquidity levels are 20%, that means the banks must keep on hand, in liquid form, 20% of the value of their borrowings. That level is higher than most countries because of BOT rules. 

 

https://www.ceicdata.com/en/indicator/thailand/capital-adequacy-ratio

[peterdarby]

44 minutes ago, Brierley said:

Capital Adequacy is only as good as the central bank that overseas it. The percentage of deposits that can be loaned in that manner is regulated by the central banks, liquidity is also regulated according to Basel I, II and III. Additionally in Thailand BOT adds its own percentage on top of the Basel protocols. As I recall, Tier I liquidity levels are 20%, that means the banks must keep on hand, in liquid form, 20% of the value of their borrowings. That level is higher than most countries because of BOT rules. 

Wasn't that as a result of the Asian financial crisis of 1997, that the banks have been much more careful?

[Brierley]

30 minutes ago, peterdarby said:

Wasn't that as a result of the Asian financial crisis of 1997, that the banks have been much more careful?

In Thailand yes. But the Basel I rules began to be formed in the mid 1980's, Basel II was 2004 ish.

[SomchaiCNX]

Nothing new, next. If you live here long enough you will noticed that nothing changed regarding loans in the last 30+ years.

 

[Nanaplaza666]

Add a beer and a bargirl in the story guys , i don't see to many people commenting on this one otherwise ????????

[thaibeachlovers]

22 hours ago, Brewster67 said:

mortgage holidays were supposed to help the poor, not increase the profits of the banks at the expense of the poor.

Since when did bankers care about anything but profit?

 

Even more worrying will be the coming inflation, which has already started in the US. IMO printing money based on nothing can only cause inflation and the US and other countries are printing massive amounts due to corona policies.

I should be OK because I owe zero debt and hopefully bank interest rates will go up, but anyone with loans of any sort could be ruined, especially all those that thought the super low interest rates would last forever.

Actually I won't be OK because rents and food prices will be going up- I doubt increased savings interest will cover that.

 

[placeholder]

4 minutes ago, thaibeachlovers said:

Since when did bankers care about anything but profit?

 

Even more worrying will be the coming inflation, which has already started in the US. IMO printing money based on nothing can only cause inflation and the US and other countries are printing massive amounts due to corona policies.

I should be OK because I owe zero debt and hopefully bank interest rates will go up, but anyone with loans of any sort could be ruined, especially all those that thought the super low interest rates would last forever.

Actually I won't be OK because rents and food prices will be going up- I doubt increased savings interest will cover that.

 

Most of the increase in inflation in the USA is due to bottlenecks in supply and pent-up demand. That should ease as the pandemic winds down. Nothing at all to do with printing money.

[thaibeachlovers]

3 hours ago, bert bloggs said:

On our estate the bank has had a house for sale for 29 million for years,i reckon as it deterirates its value now is 8 million tops 10 when it was first put on the market,so go figure,how many more like this do the banks have?

Would they not put it on their books as an asset of 29 million for purposes of covering the required amount they have to hold?

[thaibeachlovers]

2 minutes ago, placeholder said:

Most of the increase in inflation in the USA is due to bottlenecks in supply and pent-up demand. That should ease as the pandemic winds down. Nothing at all to do with printing money.

That remains to be seen.

I'll stick with my opinion.

[Thomas J]

3 minutes ago, thaibeachlovers said:

Since when did bankers care about anything but profit?

 

 

And just what do you believe banks, insurance, car, restaurants, gas stations, department stores etc etc etc. should be in business to do? 

A business is a "risk"  Money and time invested in it with the hope of making a profit.  Businesses are not started to provide jobs to people, or some other altruistic reason.  Now they ultimately benefit the public since they provide some goods or services that the public finds valuable and in their quest for profits they provide jobs to people. 

Try starting a business, investing your money that you may lose, just for "public welfare"  see how much zeal you have to make it thrive and prosper. 

[3STTW]

2 hours ago, Brierley said:

Capital Adequacy is only as good as the central bank that overseas it. The percentage of deposits that can be loaned in that manner is regulated by the central banks, liquidity is also regulated according to Basel I, II and III. Additionally in Thailand BOT adds its own percentage on top of the Basel protocols. As I recall, Tier I liquidity levels are 20%, that means the banks must keep on hand, in liquid form, 20% of the value of their borrowings. That level is higher than most countries because of BOT rules. 

 

https://www.ceicdata.com/en/indicator/thailand/capital-adequacy-ratio

 

I'm not an expert but didn't the BOT amass huge amounts of foreign reserves post 1997 - hence the rising value of the Baht over recent years? Or is that included in the 20% liquidity.

 

Someone told me recently that Thailand had started drawing on those reserves, explaining the recent fall in the Baht. Could that be true?

[RocketDog]

21 hours ago, Brewster67 said:

Fractional reserve lending is going to be a killer here. When you create 90% of the lending cash from thin air and collateralize just 10% of it then the borrower stops paying, then you can't pay down the uncollateralized debt on the balance sheet. then the bank slips into insolvency territory. So yes, I agree.

Same story in America. Many people don't know that FDIC only has funds to cover 1.6% of bank deposits. If all banks failed at once all accounts less than 250k$ would only get about 1% of it at most back. Everything above that goes to money heaven. 

[thaibeachlovers]

1 minute ago, Thomas J said:

 

 

And just what do you believe banks, insurance, car, restaurants, gas stations, department stores etc etc etc. should be in business to do? 

A business is a "risk"  Money and time invested in it with the hope of making a profit.  Businesses are not started to provide jobs to people, or some other altruistic reason.  Now they ultimately benefit the public since they provide some goods or services that the public finds valuable and in their quest for profits they provide jobs to people. 

Try starting a business, investing your money that you may lose, just for "public welfare"  see how much zeal you have to make it thrive and prosper. 

I was just responding to the OP. Why don't you attack him instead?

[J Town]

Just now, Thomas J said:

<snip>
Try starting a business, investing your money that you may lose, just for "public welfare"  see how much zeal you have to make it thrive and prosper. 

Look how the Costco model in the US operates. The CEO makes a good, fair amount as do the employees. Costco offers college tuition assistance, a GREAT health care package, and their stock rises every single year. It CAN be done, just reign back on the insane corporate greed. It can be done.

[Brierley]

7 minutes ago, 3STTW said:

 

I'm not an expert but didn't the BOT amass huge amounts of foreign reserves post 1997 - hence the rising value of the Baht over recent years? Or is that included in the 20% liquidity.

 

Someone told me recently that Thailand had started drawing on those reserves, explaining the recent fall in the Baht. Could that be true?

It is true that BOT has accumulated large Foreign Currency Reserves, over USD 150 billion. But those reserves don't belong to the banking system, their purpose is to guarantees export's and overseas trade, they are totally separate from the country's banking liquidity system so no, they are not included in the 20% I mentioned.

 

EDIT TO ADD: THB is linked to the value of USD by means of what the IMF calls a managed floating peg. That means THB tracks USD within a range but BOT can intervene to manage that range. Rises and falls in the value of THB are sometimes due to changes in the value of THB or the value of USD.

 

BOT did lend 900 billion baht to the government, from the Foreign Currency Reserves, this was to support covid relief. But it was a loan which has to be repaid, it's not a gift. The Foreign Currency Reserves do decrease from time to time if the BOT spends money on the FOREX markets to maintain the value of the Baht. BOT's job is to ensure exchange rates don't spike and cause sudden problems for exporters and they use the Foreign Currency Reserves to smooth these out.

 

.

Edited May 20, 2021 by Brierley

[CALSinCM]

22 hours ago, scubascuba3 said:

Banks have hidden big losses on their balance sheets, I wouldn't be surprised if there's a run on one or more banks eventually

Banks spew a whole lot of happy talk about being solvent, but they have continued to offer loans to any Thai with a pulse when the Thai population is extremely over-extended and in serious debt.  The banks hold that debt and continue to extend loans.  I don't for a second believe they are solvent.  But there is no downside for the banks.  They'll destroy home-owners then go to the government and IMF with their hands out.  The IMF will make them whole, bonuses will be given to top execs, and the Thai public will be saddled with austerity and poverty.  What should happen is if the bank fold, executives at the top should be jailed if the books don't support their current assertion that they are solid.  Making debt-slaves out of the Thai population works until in doesn't.

[3STTW]

2 minutes ago, Brierley said:

It is true that BOT has accumulated large Foreign Currency Reserves, over USD 150 billion. But those reserves don't belong to the banking system, their purpose is to guarantees export's and overseas trade, they are totally separate from the country's banking liquidity system so no, they are not included in the 20% I mentioned.

 

BOT did lend 900 billion baht to the government, from the Foreign Currency Reserves, this was to support covid relief. But it was a loan which has to be repaid, it's not a gift. The Foreign Currency Reserves do decrease from time to time if the BOT spends money on the FOREX markets to maintain the value of the Baht. BOT's job is to ensure exchange rates don't spike and cause sudden problems for exporters and they use the Foreign Currency Reserves to smooth these out.

 

.

 

Thanks, very informative.

[The Cipher]

4 hours ago, Sydebolle said:

So it is real estate shopping time anytime soon again ......... and never forget, the bank can and will auction off foreclosures at the remaining balance of a loan. I take it that some good deals are snatched up by the wealthy few - as always ......... 

 

How do you find out when these auctions come up? If true, I could imagine myself bidding on these.

 

[Brierley]

2 minutes ago, 3STTW said:

 

Thanks, very informative.

I meant to write, over USD 250 billion, not 150, sorry.

[rickudon]

But how much do Thai banks make with their Mortgage interest rates? The interest rates on mortgages haven't changed in the 11 years i have been here, but savings interest rates have plummeted. In the UK mortgage interest rates are half that of Thailand's (with many more options).

[Thomas J]

12 minutes ago, thaibeachlovers said:

I was just responding to the OP. Why don't you attack him instead?

If I misquoted you I apologize.  It appeared to me that you were advocating that somehow banks should have a purpose other than to make a profit.