Wazua
»
Investor
»
Economy
»
Law Capping interest rates
Rank: Member Joined: 10/27/2010 Posts: 266 Location: Nairobi
|
This act was a long time coming
|
|
|
Rank: Member Joined: 10/27/2010 Posts: 266 Location: Nairobi
|
tom_boy wrote:moneydust wrote:Obi 1 Kanobi wrote:The more I think about this bill the more I like it.
Unlike many who post out of panic, my take is the banks will immediately start looking to shore up the lost earnings from high interest rates.
Bankers have been very lazy in the way they allocate their capital, they have been getting free money from wanjiku and lending to the govt, with the other bit lent to corporates they can and anything left lent to SME's and Wanjiku and margin spreads of over 18%. The expensive loans have been used to average up the interest return/sh at say 14%
This changes now, banks will want to maintain their current average interest income return per shilling atleast coz they have to pay higher interest expense. The best way to do this is to lend to wanjiku at CBR+4% and leave out the lending to govt which was at CBR-?%
The govt will therefore have to source for funds from elsewhere.
Great bill, everyone wins. You are looking at everything upside down.Banks take deposits so that they can lend,if they cannot lend or invest the money in government securities,then,they would decline to take the deposit.Previously they would just offer a lower rate of interest for those deposits and life would go on.This discretion has been removed with the bill.So now is take it or leave it,there is nothing in between. So banks don't have to lend if they feel they are going to lose their money and consequently don't have to take deposits if there is no one to lend to. @moneydust, uko poa kweli  Hata mimi @moneydust amenichanganya. Never heard of any bank declining to take deposits. But all this is scaremongering. The core business of banking is lending, end of. Even in the US, Europe & Japan, where interest rates are very low, credit has always been readily available. The 2008 banking crisis was mainly caused by banks going out of their way to provide sub-prime mortgages.
|
|
|
Rank: Elder Joined: 2/26/2012 Posts: 15,980
|
Obi 1 Kanobi wrote:murchr wrote:snifadog wrote:..if they cannot lend or invest the money in government securities,then,they would decline to take the deposit..
what other business will they be doing if they stop taking deposits and lending? they will stop being banks? maybe just maybe they will stop undermining the role of the CRBs now They will lend to those who have proven that they can pay, and fund projects. Note there are people who get loans at 11 and 12%. Banks can team up and finance some of the large projects etc The small time borrowers eg, those who take up loans to buy proboxes and subarus, those who take up loans to set up exhibitions, mpango wa salo, flexi salo, bla bla - going.... Boss stop with your hypothetical scenarios. Which are these large projects which did not exist yesterday. Banks already favour lending to large corporates so nothing new here. Banks had profit targets yesterday and still have profit targets today, they are not interested in sticking it to wanjiku, so in deciding on who to lend they will follow the same due diligence they have in the past, if one qualifies, they will lend at a rate below the ceiling, period. Watch this space. @moneydust. Banks will take deposits no doubt but that dreamy 7% interest is a pipe dream. "There are only two emotions in the market, hope & fear. The problem is you hope when you should fear & fear when you should hope: - Jesse Livermore
.
|
|
|
Rank: Veteran Joined: 7/3/2007 Posts: 1,635
|
guru267 wrote:Obi 1 Kanobi wrote:murchr wrote:snifadog wrote:..if they cannot lend or invest the money in government securities,then,they would decline to take the deposit..
what other business will they be doing if they stop taking deposits and lending? they will stop being banks? maybe just maybe they will stop undermining the role of the CRBs now They will lend to those who have proven that they can pay, and fund projects. Note there are people who get loans at 11 and 12%. Banks can team up and finance some of the large projects etc The small time borrowers eg, those who take up loans to buy proboxes and subarus, those who take up loans to set up exhibitions, mpango wa salo, flexi salo, bla bla - going.... Boss stop with your hypothetical scenarios. Which are these large projects which did not exist yesterday. Banks already favour lending to large corporates so nothing new here. Banks had profit targets yesterday and still have profit targets today, they are not interested in sticking it to wanjiku, so in deciding on who to lend they will follow the same due diligence they have in the past, if one qualifies, they will lend at a rate below the ceiling, period. The Banks need this law reversed asap... So they will strangle Wanjiku until she is begging for it to be reversed.. Even if it means taking less profits in the short term... In other words they will do exactly what they have already been doing, only more of it. This is like holding a gun to your own head "reverse this law or I shoot" Good luck with that. "The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)
|
|
|
Rank: Member Joined: 10/28/2008 Posts: 41
|
Okay...Interesting thread... Myopia abound. The crowd will cheer your coronation as well as your beheading. People like a show, that's all.
|
|
|
Rank: Elder Joined: 2/26/2012 Posts: 15,980
|
Caramba wrote:tom_boy wrote:moneydust wrote:Obi 1 Kanobi wrote:The more I think about this bill the more I like it.
Unlike many who post out of panic, my take is the banks will immediately start looking to shore up the lost earnings from high interest rates.
Bankers have been very lazy in the way they allocate their capital, they have been getting free money from wanjiku and lending to the govt, with the other bit lent to corporates they can and anything left lent to SME's and Wanjiku and margin spreads of over 18%. The expensive loans have been used to average up the interest return/sh at say 14%
This changes now, banks will want to maintain their current average interest income return per shilling atleast coz they have to pay higher interest expense. The best way to do this is to lend to wanjiku at CBR+4% and leave out the lending to govt which was at CBR-?%
The govt will therefore have to source for funds from elsewhere.
Great bill, everyone wins. You are looking at everything upside down.Banks take deposits so that they can lend,if they cannot lend or invest the money in government securities,then,they would decline to take the deposit.Previously they would just offer a lower rate of interest for those deposits and life would go on.This discretion has been removed with the bill.So now is take it or leave it,there is nothing in between. So banks don't have to lend if they feel they are going to lose their money and consequently don't have to take deposits if there is no one to lend to. @moneydust, uko poa kweli Hata mimi @moneydust amenichanganya. Never heard of any bank declining to take deposits. But all this is scaremongering. The core business of banking is lending, end of. Even in the US, Europe & Japan, where interest rates are very low, credit has always been readily available. The 2008 banking crisis was mainly caused by banks going out of their way to provide sub-prime mortgages. People..........Banks will lend the question is to who? Please dont talk about the western economies if you dont know how the systems work there. For the US 1. No one will lend you money if you have no credit score. Unless ofcourse you go to shylocks who will either seek to garnish your check or pawn your property. 2. If your credit score stinks, you will get loans at greater than 29% and if you default the % increases. and everyone is alerted about your defaulter tendencies so even landlords dont want to touch you. I know someone who paid up their loan at 300% In Kenya, even your govt doesn't know you. The risk of wanjiku taking the loan and running to Tanzania is very high. So unsecured loans, mkopo wa salo and such like loans are not feasible in this environment "There are only two emotions in the market, hope & fear. The problem is you hope when you should fear & fear when you should hope: - Jesse Livermore
.
|
|
|
Rank: Member Joined: 10/28/2008 Posts: 41
|
murchr wrote:Caramba wrote:tom_boy wrote:moneydust wrote:Obi 1 Kanobi wrote:The more I think about this bill the more I like it.
Unlike many who post out of panic, my take is the banks will immediately start looking to shore up the lost earnings from high interest rates.
Bankers have been very lazy in the way they allocate their capital, they have been getting free money from wanjiku and lending to the govt, with the other bit lent to corporates they can and anything left lent to SME's and Wanjiku and margin spreads of over 18%. The expensive loans have been used to average up the interest return/sh at say 14%
This changes now, banks will want to maintain their current average interest income return per shilling atleast coz they have to pay higher interest expense. The best way to do this is to lend to wanjiku at CBR+4% and leave out the lending to govt which was at CBR-?%
The govt will therefore have to source for funds from elsewhere.
Great bill, everyone wins. You are looking at everything upside down.Banks take deposits so that they can lend,if they cannot lend or invest the money in government securities,then,they would decline to take the deposit.Previously they would just offer a lower rate of interest for those deposits and life would go on.This discretion has been removed with the bill.So now is take it or leave it,there is nothing in between. So banks don't have to lend if they feel they are going to lose their money and consequently don't have to take deposits if there is no one to lend to. @moneydust, uko poa kweli Hata mimi @moneydust amenichanganya. Never heard of any bank declining to take deposits. But all this is scaremongering. The core business of banking is lending, end of. Even in the US, Europe & Japan, where interest rates are very low, credit has always been readily available. The 2008 banking crisis was mainly caused by banks going out of their way to provide sub-prime mortgages. People..........Banks will lend the question is to who? Please dont talk about the western economies if you dont know how the systems work there. For the US 1. No one will lend you money if you have no credit score. Unless ofcourse you go to shylocks who will either seek to garnish your check or pawn your property. 2. If your credit score stinks, you will get loans at greater than 29% and if you default the % increases. and everyone is alerted about your defaulter tendencies so even landlords dont want to touch you. I know someone who paid up their loan at 300% In Kenya, even your govt doesn't know you. The risk of wanjiku taking the loan and running to Tanzania is very high. So unsecured loans, mkopo wa salo and such like loans are not feasible in this environment  Exactly. Also even if they do lend, why would they go for such a risky group? There is govt, large corporates... Less risky. The crowd will cheer your coronation as well as your beheading. People like a show, that's all.
|
|
|
Rank: Chief Joined: 5/9/2007 Posts: 13,095
|
By the way, how does this law affect other investment areas like Unit Trust?
|
|
|
Rank: Member Joined: 1/31/2007 Posts: 304
|
Caramba wrote:tom_boy wrote:moneydust wrote:Obi 1 Kanobi wrote:The more I think about this bill the more I like it.
Unlike many who post out of panic, my take is the banks will immediately start looking to shore up the lost earnings from high interest rates.
Bankers have been very lazy in the way they allocate their capital, they have been getting free money from wanjiku and lending to the govt, with the other bit lent to corporates they can and anything left lent to SME's and Wanjiku and margin spreads of over 18%. The expensive loans have been used to average up the interest return/sh at say 14%
This changes now, banks will want to maintain their current average interest income return per shilling atleast coz they have to pay higher interest expense. The best way to do this is to lend to wanjiku at CBR+4% and leave out the lending to govt which was at CBR-?%
The govt will therefore have to source for funds from elsewhere.
Great bill, everyone wins. You are looking at everything upside down.Banks take deposits so that they can lend,if they cannot lend or invest the money in government securities,then,they would decline to take the deposit.Previously they would just offer a lower rate of interest for those deposits and life would go on.This discretion has been removed with the bill.So now is take it or leave it,there is nothing in between. So banks don't have to lend if they feel they are going to lose their money and consequently don't have to take deposits if there is no one to lend to. @moneydust, uko poa kweli Hata mimi @moneydust amenichanganya. Never heard of any bank declining to take deposits. But all this is scaremongering. The core business of banking is lending, end of. Even in the US, Europe & Japan, where interest rates are very low, credit has always been readily available. The 2008 banking crisis was mainly caused by banks going out of their way to provide sub-prime mortgages. Many things are going to shock you going forward,the same way the interest capping law has being a shocker to the industry.Everyone will need to adjust what they know about the banking industry. Sometime back, before the interest rate crisis of last year I had visited a certain branch manager of a Tier 1 bank with a view of fixing some substantial sum of money.I thought the guy would be literary kissing my feet but alas the guy was like, "Right now customers are not taking loans, we are having so much cash around and, we are actually unwinding our term deposit contracts so as not to affect our bottomline". To cut the long story short he offered me such a ridiculous rate of interest that I just walked out of the bank.Yes,banks do have a choice and lets not forget they are out to make money no matter what.
|
|
|
Rank: Elder Joined: 9/23/2010 Posts: 2,225 Location: Sundowner,Amboseli
|
obiero wrote:Sufficiently Philanga....thropic wrote:Simba must bow down to THE 20s That is unlikely elder Next stop.........THE TEENS @SufficientlyP
|
|
|
Wazua
»
Investor
»
Economy
»
Law Capping interest rates
Forum Jump
You cannot post new topics in this forum.
You cannot reply to topics in this forum.
You cannot delete your posts in this forum.
You cannot edit your posts in this forum.
You cannot create polls in this forum.
You cannot vote in polls in this forum.
|